Hopes of a takeover of Forth Ports, Britain’s last remaining dock owner in public hands, sank below a tide of debt yesterday as Babcock & Brown, its biggest shareholder, battled to reassure investors over its borrowings.

Babcock, the Australian investment fund, revived bid talk on Monday by raising its stake in the Edinburgh-based port operator from 19.6 per cent to 22 per cent. But it is thought that Aegon, the Dutch fund manager, wanted to sell its 5 per cent stake at a cheap price and Babcock moved opportunistically to pick it up.

Aegon, with its UK base in Edinburgh, should know about the city’s property market where Forth has 40 acres of land available for development on the waterfront. With most of the country’s housebuilders in dire straits and values of commercial property, plunging there are unlikely to be any takers. Forth lost 115p to £18.65.

Meanwhile Babcock & Brown shares dived by 20 per cent in Australia, sending its market capitalisation below A$2.5 billion as hedge funds shorted the stock in the hope that it would breach covenants. If its market value falls below A$2.5 billion, its lenders can call for a four-month review of its borrowings.

The FTSE 100 meanwhile rose 67.20 points to 5,790.5 as shorters decided to take profits and close positions for now. But most traders warned that the downward trend would continue.

HBOS closed above its 275p rights price, up 25p to 283p. Barratt Developments bounced a little way from its tailspin, up 3¾p to 76¼p after Panmure Gordon issued a “buy” note and Phoenix Asset Management raised its stake to 8.54 per cent. But KBC Peel Hunt raised concerns about a crucial £400 million loan that has not yet been signed off.

Taylor Wimpeyshowed a more confident recovery, up 8½p to 61p, and Johnston Press also lifted above its 53p rights price, up 8p to 58p.

Carphone Warehouse was the dog of the day, down 25¼p to 202½p, after it revealed slowing broadband subscription growth, and Home Retail Group, the owner of Homebase and Argos, fell 8¾p to 215p as its finance director said that his forecasts for 2009 consumer spending were becoming more pessimistic. The figures for Homebase – a smaller part of total earnings – looked dreadful. Kingfisher was far worse affected, down 5.3p to 118.9p.

Alliance & Leicester was the only bank stock on the slide, down 13¼p to 305½p. It will be ejected from the FTSE 100 next week.

Mitchells & Butlers gained 4¾p to 236p after Citigroup suggested that shareholder Robert Tchenguiz, who recently bought into Whitbread, could be looking to engineer a deal whereby Whitbread swaps its pubs for M&B’s hotels.

Robert Walters lost 5¼p to 136½p after Panmure Gordon cut to “sell” with a 114p target, saying that the recruiters’ second half could be grim as housebuilding, retail and motor dealer job demand was set to crumble.

Hampson Industries rose ½p to 174p on talk of an imminent aerospace contract win from its subsidiary acquired this week.

— New York: Stronger US retail sales than expected in May and InBev’s takeover bid for Anheuser-Busch restored investor optimism and boosted shares. The Dow Jones industrial average closed up 57.80 points to 12,141.60.

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