The market appears to have decided on BBI's potential to reduce its debt burden with sellers down to 3c. Moody's have also taken a dim view, reducing its rating. BBI probably stands for "bye bye investment" some might feel it means "buy buy it'scheap". I'm waving it away.
BBI - Babcock & Brown Infrastructure
- Thread starter roland
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The market appears to have decided on BBI's potential to reduce its debt burden with sellers down to 3c. Moody's have also taken a dim view, reducing its rating. BBI probably stands for "bye bye investment" some might feel it means "buy buy it'scheap". I'm waving it away.
well yeah, it does not help when babcock and brown is in a trading halt. hopefully it gets an extention and realignment of debt.
I wonder why I'm still bothering. It's now below 3c - what did you mean by a "trading halt" and who would give it an extension?
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What's BNB going under got to do with BBI. BBI own quality monopolistic infrastructure assets, do not have any debt relationship with BNB, and are not under a forced selling program. They have decided to sell assets only at book value or above to reduce corporate debt.
I cannot see what the panic is all about. Stepped in and bought 800,000 at 2.5c today. Put in the drawer and wait for the credit markets to thaw.
I cannot see what the panic is all about. Stepped in and bought 800,000 at 2.5c today. Put in the drawer and wait for the credit markets to thaw.
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Actually, BBI is NOT a forced seller of any assets. They will only sell assets where they can get book value or better. The assets are in the books at cost less depreciation. Very conservative and proved so with the sale of 50% of Powerco at 25% ABOVE book value.
Dalrymple Bay Coal Terminal looks to be attracting various serious buyers at around enterprise value of 2.5 billion or more. Xstrata, Macarthur Coal, just to name a few.
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Time will tell.
My bet is that BBI's assets will ultimately be sold under administration with the proceeds being used to cover it's debts and nothing left over for the shareholders.
I hope I am wrong but in the present environment where credit is tight and asset prices are under pressure I see no other alternative. This too is the market's view judging by the share price.
In my view the only question remaining here is the level of writedowns that BBI's creditors will have to wear on their loans.
My bet is that BBI's assets will ultimately be sold under administration with the proceeds being used to cover it's debts and nothing left over for the shareholders.
I hope I am wrong but in the present environment where credit is tight and asset prices are under pressure I see no other alternative. This too is the market's view judging by the share price.
In my view the only question remaining here is the level of writedowns that BBI's creditors will have to wear on their loans.
Banska I hope you end up selling these shares for $800k. A much better posting than the prophecy from DrdoomMight be worth looking at BBI now, since we finally have a media report that paints a positive picture on the survival of the satellites.
http://www.theaustralian.news.com.au/business/story/0,28124,24687340-5001641,00.html
Extract:
Given there is no cross-collatoralisation with Babcock & Brown, there is a quite reasonable case which says the soundest of the satellites can sustain commercial life even after the collapse of the Babcock death star.
Indeed, BBW and BBI might well benefit from Babcock's demise as it would speed the migration of the headstock management into the companies which own the assets, and permanently staunch the outflow of fees.
This is not to diminish the nature of the life-threatening complexities ahead for BBW and, more particularly, BBI. It is only to suggest that those challenges might just as easily be faced on their own as under the banner of Larkin's tainted enterprise.
Based on share price performance, the market seems to have decided BBW has some chance of survival while BBI is little more than a liquidation prospect.
BBI closed at 2.8 cents a share last night, which means it is carrying debts of $9 billion or so on a market capitalisation of just $60 million. On Wednesday, Moody's downgraded the BBI family to Ba2 and signalled further cuts to come.
And yet, the company recently sold half of just the New Zealand assets of Powerco for $1 billion, a price the equivalent of 25 times free cash flow.
Now if you valued the whole of BBI's portfolio on that basis, its equity would be worth maybe $5billion. And the thing is, there is no particular reason not to use that sort of metric as most of BBI's assets are monopolies with EBITDA-to-interest cover ranging between 2.3 and 2.5 times.
Those ratios would have to halve for BBI to be in breach of covenants, and that is an unlikely outcome given the individual price regulators would have to breach agreements to effect lower pricing.
http://www.theaustralian.news.com.au/business/story/0,28124,24687340-5001641,00.html
Extract:
Given there is no cross-collatoralisation with Babcock & Brown, there is a quite reasonable case which says the soundest of the satellites can sustain commercial life even after the collapse of the Babcock death star.
Indeed, BBW and BBI might well benefit from Babcock's demise as it would speed the migration of the headstock management into the companies which own the assets, and permanently staunch the outflow of fees.
This is not to diminish the nature of the life-threatening complexities ahead for BBW and, more particularly, BBI. It is only to suggest that those challenges might just as easily be faced on their own as under the banner of Larkin's tainted enterprise.
Based on share price performance, the market seems to have decided BBW has some chance of survival while BBI is little more than a liquidation prospect.
BBI closed at 2.8 cents a share last night, which means it is carrying debts of $9 billion or so on a market capitalisation of just $60 million. On Wednesday, Moody's downgraded the BBI family to Ba2 and signalled further cuts to come.
And yet, the company recently sold half of just the New Zealand assets of Powerco for $1 billion, a price the equivalent of 25 times free cash flow.
Now if you valued the whole of BBI's portfolio on that basis, its equity would be worth maybe $5billion. And the thing is, there is no particular reason not to use that sort of metric as most of BBI's assets are monopolies with EBITDA-to-interest cover ranging between 2.3 and 2.5 times.
Those ratios would have to halve for BBI to be in breach of covenants, and that is an unlikely outcome given the individual price regulators would have to breach agreements to effect lower pricing.
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Just looking closer at the fundamentals it appears to me that things are perhaps not as critical as the market would have us believe.
Their interest cover looks more than comfortable. If they sell another asset at book price or over, they really appear to be a tremendous chance of surviving, even with BNB falling over.
Regulated incomes from quality assets and most of the debt is actually non-recourse to BBI so another plus.
They look to be a bit tight until Powerco proceeds come through in February.
Once the 320 million comes in for that, I see a bright future for BBI.
I understand an EGM will be called soon to change the name, assuming BNB is history. That will help too.
Their interest cover looks more than comfortable. If they sell another asset at book price or over, they really appear to be a tremendous chance of surviving, even with BNB falling over.
Regulated incomes from quality assets and most of the debt is actually non-recourse to BBI so another plus.
They look to be a bit tight until Powerco proceeds come through in February.
Once the 320 million comes in for that, I see a bright future for BBI.
I understand an EGM will be called soon to change the name, assuming BNB is history. That will help too.
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Macarthur eyes BBI's coal port
BusinessSpectator
Macarthur Coal says it is interested in buying a stake in Babcock & Brown Infrastructure's (BBI) Dalrymple Bay coal terminal, if BBI wants to sell it, reported The Australian.
Macarthur's chief executive Nicole Hollows said "we have a robust balance sheet and will consider opportunities," adding that "if the [Dalrymple Bay] terminal became available we will consider that an opportunity."
It was reported that BBI had put its $2.3 billion Dalrymple Bay coal port up for sale this week, to cover debt and find a partner to fund long-term expansion.
It was thought that BBI had been approached by a consortium of miners interested in buying Dalrymple Bay, and has issued confidentiality agreements to interested parties.
A BBI spokeswoman confirmed that the group was testing the market after port users approached it.
She said selling a stake could help fund the port's expansion, but that this did not mean a sale would happen.
She did not confirm whether BBI would want to limit a potential sale to a 49 per cent stake.
But Ms Hollows indicated that interested parties could be eyeing a bigger slice.
BusinessSpectator
Macarthur Coal says it is interested in buying a stake in Babcock & Brown Infrastructure's (BBI) Dalrymple Bay coal terminal, if BBI wants to sell it, reported The Australian.
Macarthur's chief executive Nicole Hollows said "we have a robust balance sheet and will consider opportunities," adding that "if the [Dalrymple Bay] terminal became available we will consider that an opportunity."
It was reported that BBI had put its $2.3 billion Dalrymple Bay coal port up for sale this week, to cover debt and find a partner to fund long-term expansion.
It was thought that BBI had been approached by a consortium of miners interested in buying Dalrymple Bay, and has issued confidentiality agreements to interested parties.
A BBI spokeswoman confirmed that the group was testing the market after port users approached it.
She said selling a stake could help fund the port's expansion, but that this did not mean a sale would happen.
She did not confirm whether BBI would want to limit a potential sale to a 49 per cent stake.
But Ms Hollows indicated that interested parties could be eyeing a bigger slice.
I recommend you read Robert Gottliebson's article "The Big Owe"
http://www.eurekareport.com.au/iis/iis.nsf/pages/C1BC0964167542C1CA25750B001F5700?OpenDocument
In it it claims BBI owes more then 8.4 billion dollars
http://www.eurekareport.com.au/iis/iis.nsf/pages/C1BC0964167542C1CA25750B001F5700?OpenDocument
In it it claims BBI owes more then 8.4 billion dollars
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BBI actually owe about 10 billion so they are wrong on that count.
What they do not point out is that 90% of the total debt is non-recourse debt. It makes a huge difference. If an asset's cash flow fails to pay it's interest bill to the lending bank, the lending bank only has recourse to that particular asset. BBI cannot fall over if a particular asset goes broke.
At the moment, cash flows from assets are covering interest payments on a 1.83 times basis. Another asset sale and this goes above 2.0 times.
Their corporate debt interest, which is the critical debt in terms of survival, is covered by free cash flow a staggering 7 times. The lock up level is 2 times so now we can understand why the banks have not forced BBI to sell assets, rather the BBI Board has taken the prudent step in the current environment to reduce overall debt, specifically corporate debt.
I am more than comfortable with my 800,000 shares at 2.5c. They are there for the long term. This stock is a steal at current prices although there are obviously risks. They do need to sell one more asset at book value and they are out of the woods until at least 2010.
They sold 50% of Powerco at 25% above book value, which goes well for the sale of Dalrymple Bay Coal Terminal. It's a hard stock to understand for the average investor, that's why it's 3c.
What they do not point out is that 90% of the total debt is non-recourse debt. It makes a huge difference. If an asset's cash flow fails to pay it's interest bill to the lending bank, the lending bank only has recourse to that particular asset. BBI cannot fall over if a particular asset goes broke.
At the moment, cash flows from assets are covering interest payments on a 1.83 times basis. Another asset sale and this goes above 2.0 times.
Their corporate debt interest, which is the critical debt in terms of survival, is covered by free cash flow a staggering 7 times. The lock up level is 2 times so now we can understand why the banks have not forced BBI to sell assets, rather the BBI Board has taken the prudent step in the current environment to reduce overall debt, specifically corporate debt.
I am more than comfortable with my 800,000 shares at 2.5c. They are there for the long term. This stock is a steal at current prices although there are obviously risks. They do need to sell one more asset at book value and they are out of the woods until at least 2010.
They sold 50% of Powerco at 25% above book value, which goes well for the sale of Dalrymple Bay Coal Terminal. It's a hard stock to understand for the average investor, that's why it's 3c.
BBI is a good bet!
It may still go down the toilet.
But it is a good bet! (at these prices).
I bought a decent size parcel yesterday.
Even if it does go into liquidation I wont regret my gamble. I don't think it will though (obviously).
This share is so oversold imho because it has the name Babcock in it and it has debt.
The debt is high sure, but then look at the assets and look at the cash flow. Blood ie good I think.
What major infrastructure business doesn't have debt?
BBI in recent times has been guilty by association with Babcock and Brown and with BBP but it is not the same animal. It is and rightly so standing its ground and seperating itself from the mother ship that was frankly nothing but a drain. Good move!
Management were given a good shake up at the AGM i believe and know what they have to do.
As stated earlier by others we just need to dispose of one more asset and obtain fair dollars for it or part thereof and we can all breath a sigh of relief.
I'm happy.
My heart does go out to all those who bought in earlier and lost value and those large dividends. Such is life.
It may still go down the toilet.
But it is a good bet! (at these prices).
I bought a decent size parcel yesterday.
Even if it does go into liquidation I wont regret my gamble. I don't think it will though (obviously).
This share is so oversold imho because it has the name Babcock in it and it has debt.
The debt is high sure, but then look at the assets and look at the cash flow. Blood ie good I think.
What major infrastructure business doesn't have debt?
BBI in recent times has been guilty by association with Babcock and Brown and with BBP but it is not the same animal. It is and rightly so standing its ground and seperating itself from the mother ship that was frankly nothing but a drain. Good move!
Management were given a good shake up at the AGM i believe and know what they have to do.
As stated earlier by others we just need to dispose of one more asset and obtain fair dollars for it or part thereof and we can all breath a sigh of relief.
I'm happy.
My heart does go out to all those who bought in earlier and lost value and those large dividends. Such is life.
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Good question. The media overall have been extremely innaccurate in their reporting of the BNB satellites. One newspaper said that BNB would have to sell Dalrymple Bay Coal Terminal urgently to pay down debt. BNB do not even own Dalrymple Bay Coal Terminal so how the heck would they sell it?
BBI own DBCT and they have put it up for sale but only at the right price. That means well in excess of book value.
skc
Goldmember
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Hey Banska - very impressed with your understanding of BBI's debt position. Great to see posters backup their position with well researched facts. Can I ask you a few questions?
- I assume the corporate level free cash flow comes from the residual cash flow from the assets, various fees like management, performance and other one-off acquisition / financing fees. Do you know what is the projected corporate free cash flow given that some of those fees will be greatly reduced?
- Do you know where I can find their debt maturity profile at the corporate level?
Thanks for sharing.
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skye,
All those are answered in the BBI Investor pack released in October. It's on the asx website under company announcements.
There's still risk in BBI and a fair bit of it but if they survive, 3c will prove to be a steal. I'm thinking a 20 bagger (60c) in two years. They need some things to go their way, like global credit to start to flow again and the equity markets to not keep plummeting to new lows almost weekly. Fundamentally though, whilst they have numerous hurdles to overcome, they look OK, certainly not on life support like a 3c price indicates.
I reckon the patient is a bit crook and needs hospital treatment but certainly not intensive care yet. 25% of net asset valuation would be appropriate now, not 2%.
They will range trade between 2c and 5c until a significant announcement is made.
All those are answered in the BBI Investor pack released in October. It's on the asx website under company announcements.
There's still risk in BBI and a fair bit of it but if they survive, 3c will prove to be a steal. I'm thinking a 20 bagger (60c) in two years. They need some things to go their way, like global credit to start to flow again and the equity markets to not keep plummeting to new lows almost weekly. Fundamentally though, whilst they have numerous hurdles to overcome, they look OK, certainly not on life support like a 3c price indicates.
I reckon the patient is a bit crook and needs hospital treatment but certainly not intensive care yet. 25% of net asset valuation would be appropriate now, not 2%.
They will range trade between 2c and 5c until a significant announcement is made.
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Miners interested in share of coal port
27 Nov 2008
Macarthur Coal may have expressed an interest in buying a stake in one of Australia's largest coal ports, say industry sources.
Macarthur Coal already ships via the Dalrymple Bay port
It would be a logical move, since it has been the mining companies themselves who have become frustrated with the bottlenecks at the northern Queensland port of Dalrymple Bay, resulting in a push for expansion.
The port has a present capacity of 68 million tonnes per annum (mtpa) which has just got the go-ahead for a $639m expansion which should up capacity to 85 mtpa to meet increasing demand from the coal producers.
Babcock & Brown Infrastructure (part of the troubled Babcock & Brown bank) was originally looking to sell a 30-49% stake, partly to help settle debts and partly to expand the ports capacity. However, Macarthur (who are possibly fronting a consortium of miners wishing to move into the port) may well be looking for a larger stake than originally on the table.
We now have numerous serious potential buyers for DBCT.
Macarthur Coal, Xstrata, QIC, BHP and from all reports a few others are all looking to buy this quality infrastructure asset and it may their one and only chance. These assets typically do not come up for sale often. The competition to buy this will be fierce. The profit generated above book value for BBI will go a long way to wiping out BBI's corporate debt. Once corporate debt is nil or so small as to be insignificant, BBI will have gone a long way to securing it's future. The recovery is beginning.
27 Nov 2008
Macarthur Coal may have expressed an interest in buying a stake in one of Australia's largest coal ports, say industry sources.
Macarthur Coal already ships via the Dalrymple Bay port
It would be a logical move, since it has been the mining companies themselves who have become frustrated with the bottlenecks at the northern Queensland port of Dalrymple Bay, resulting in a push for expansion.
The port has a present capacity of 68 million tonnes per annum (mtpa) which has just got the go-ahead for a $639m expansion which should up capacity to 85 mtpa to meet increasing demand from the coal producers.
Babcock & Brown Infrastructure (part of the troubled Babcock & Brown bank) was originally looking to sell a 30-49% stake, partly to help settle debts and partly to expand the ports capacity. However, Macarthur (who are possibly fronting a consortium of miners wishing to move into the port) may well be looking for a larger stake than originally on the table.
We now have numerous serious potential buyers for DBCT.
Macarthur Coal, Xstrata, QIC, BHP and from all reports a few others are all looking to buy this quality infrastructure asset and it may their one and only chance. These assets typically do not come up for sale often. The competition to buy this will be fierce. The profit generated above book value for BBI will go a long way to wiping out BBI's corporate debt. Once corporate debt is nil or so small as to be insignificant, BBI will have gone a long way to securing it's future. The recovery is beginning.
Great posting banska bystrica.
I was very pleased when i heard of the demise of the takeover of Rio by BHP on Tuesday night.
To the best of my knowledge BHP have 5 coal mines utilizing the Dalrymple Coal terminal and Macarthur Coal 2 mines.
Even with the economic downturn throughout the world the demand for our coal through this terminal will not be effected.
BHP would no doubt be weighing up the current situation having not just a look at the terminal but also at Macarthur Coal itself once again, as it has previously eyed it previous to Rio talks.
Share price of Macarthur was in the high twenties then and is now down to $3 something.
Opportunity doors have as you stated opened up not just for BHP but for a number of parties with a win win situation for many.
This is certainly a positive for BBI and can do us no harm.
I was very pleased when i heard of the demise of the takeover of Rio by BHP on Tuesday night.
To the best of my knowledge BHP have 5 coal mines utilizing the Dalrymple Coal terminal and Macarthur Coal 2 mines.
Even with the economic downturn throughout the world the demand for our coal through this terminal will not be effected.
BHP would no doubt be weighing up the current situation having not just a look at the terminal but also at Macarthur Coal itself once again, as it has previously eyed it previous to Rio talks.
Share price of Macarthur was in the high twenties then and is now down to $3 something.
Opportunity doors have as you stated opened up not just for BHP but for a number of parties with a win win situation for many.
This is certainly a positive for BBI and can do us no harm.
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My feeling is that once Euroports or Dalrymple Bay sells, BBI will have a substantial rally. The market will realize their asset values are not impaired at all. These assets are not empty commercial properties or vacant shopping malls or "inflated" aircraft leases. They are essential infrastructure. Gas supply, electricity supply, ports, rail networks etc.
If BBI did not have an association with "Babcock and Brown" and their corporate debt was nearly zero, they would be trading at at least 50% of net asset valuation. In other words, around 60c.
The parent (BNB) has sucked the life out of the children (BBI, BBP, BBW, BBC and a few others) via excessive management fees. Once the parent is officially dead, the children will have much more nourishment. They will flourish on their own without the restraints of their parent.
Two assets sales and corporate debt is zero.
Once that happens, I see a real chance of distributions being restored in 2009/10. That's when we will see a real re-rating of BBI, back at 50c+ where it should be.
A name change is also imminent once BNB is officially in receivership. That will help to show the uninformed this company can survive on its own and has no characteristics of the over-bearing parent.
If BBI did not have an association with "Babcock and Brown" and their corporate debt was nearly zero, they would be trading at at least 50% of net asset valuation. In other words, around 60c.
The parent (BNB) has sucked the life out of the children (BBI, BBP, BBW, BBC and a few others) via excessive management fees. Once the parent is officially dead, the children will have much more nourishment. They will flourish on their own without the restraints of their parent.
Two assets sales and corporate debt is zero.
Once that happens, I see a real chance of distributions being restored in 2009/10. That's when we will see a real re-rating of BBI, back at 50c+ where it should be.
A name change is also imminent once BNB is officially in receivership. That will help to show the uninformed this company can survive on its own and has no characteristics of the over-bearing parent.
