BBI - Babcock & Brown Infrastructure

[Viva_Las_Vegas]

To add to the BBI survival debate check out this site I found

http://www.railexpress.com.au/archi...es/bbi-draws-up-dalrymple-bay-stake-shortlist

The values it qoutes for DBCT sure add weight to Banksa's comments regarding BBI being free of debt if the whole of DBCT is sold.

There seems to be a lot more articles online about this subject.

How does everyone feel about the SPARCS announcement today?

 

[nulla nulla]

To add to the BBI survival debate check out this site I found

http://www.railexpress.com.au/archi...es/bbi-draws-up-dalrymple-bay-stake-shortlist

The values it qoutes for DBCT sure add weight to Banksa's comments regarding BBI being free of debt if the whole of DBCT is sold.

There seems to be a lot more articles online about this subject.

How does everyone feel about the SPARCS announcement today?

My initial impression is that bbi are moving to avoid:
1. The collapse of the market price due to the dilution of share values that would occur if the conversion went through; and
2. The further collapse of the market price (if the conversion went through) as any of the sparc holders started selling down the shares issued.

 

[Viva_Las_Vegas]

nulla nulla......please don't say collapse....otherwise i'll carp myself!

OR I may be pushed to sell off at a stupid price, like I've been know to do in the past.

From what I read in the announcement, BBI will be issuing about 14% of the total shares out there to SPARCS if converted?

 

[banska bystrica]

Great result. If I were holding SPARCS, I would have covered all bases and sent in a request for conversion form just in case the vote at the meeting doesn't get the 75% required.

The fact that such a small number have requested conversion means that it is almost a shoe-in that they will get the 75% required to approve the new 2010 date as a reset date and therefore there will be NO dilution. All SPARCS holders have to abide by the vote result, even those who requested conversion. The conversion requests will be voided if 75% vote for the new terms.

 

[fuzzie]

So if the SPARCS people approve the change of Trust Deed, which is likely since only ~17% of holders put in conversion requests, that means there is no chance of a cash distribution from BBI or BEPPA until all SPARCS are redeemed i.e. new earliest date will be 17 Nov 2010, even if DBCT is sold.

I'm beginning to see why this is a long term play. And the stock market these days is long term play adverse, especially instos who will be fighting to show some short term positive numbers to advertise their products as being winners?

 

[banska bystrica]

So if the SPARCS people approve the change of Trust Deed, which is likely since only ~17% of holders put in conversion requests, that means there is no chance of a cash distribution from BBI or BEPPA until all SPARCS are redeemed i.e. new earliest date will be 17 Nov 2010, even if DBCT is sold.

Hi fuzzie,
You're half right. However, if a 100% DBCT sale and/or PD Ports sale generates enough cash to pay off corporate debt, BBI can then use existing cash plus free cash generated by ongoing business to also pay out SPARCS in full before 17 Nov 2010.

 

[Mitsimonsta]

I'm a new member here, specifically signed up to get a feel for BEPPA.
A little upset that I had not bought into it already - especially around the 4c mark when I had the chance, I got some RIO shares at $47 instead.

At this point in time, I'd be happy to get some BEPPA and hold - I am in a buy & hold strategy for now.

Great info in the thread Banksa, will keep an eye on it.

Holding: CBA, FMG, FXJ, MAP, ORG, RIO, SHL if you are wondering

 

[banska bystrica]

A poor lost soul over the road wrote this classic:

"BBI and BEPPA are rowing the same boat. BEPPA turns into BBI ords.

If there is more dilution now, it makes it even worse for BEPPA as BBI share price will be lower upon dilution.

Think about it."

I think he should have a long hard think about it. The price of BBI at BEPPA conversion date is meaningless to BEPPA holders. The lower the price, the more BBI shares we receive.
If BBI is 5c, we receive 20 BBI shares for every BEPPA.
If BBI is 1c, we receive 100 BBI shares for every BEPPA
If BBI is $1, we receive 1 BBI share for every BEPPA.

I cannot believe a person with 20+ years of finance experience cannot comprehend the simplest of matters. Folks, be careful who you listen to.

 

[awg]

A poor lost soul over the road wrote this classic:

"BBI and BEPPA are rowing the same boat. BEPPA turns into BBI ords.

If there is more dilution now, it makes it even worse for BEPPA as BBI share price will be lower upon dilution.

Think about it."

I think he should have a long hard think about it. The price of BBI at BEPPA conversion date is meaningless to BEPPA holders. The lower the price, the more BBI shares we receive.
If BBI is 5c, we receive 20 BBI shares for every BEPPA.
If BBI is 1c, we receive 100 BBI shares for every BEPPA
If BBI is $1, we receive 1 BBI share for every BEPPA.

I cannot believe a person with 20+ years of finance experience cannot comprehend the simplest of matters. Folks, be careful who you listen to.

I agree with what you are saying, but do you think perhaps some of the dilution is likely to take place in the market after the conversion, due to general bearishness, offloading, etc...therefore pushing down the price and effectively diluting your investment cash value?

 

[banska bystrica]

It's a hypothetical argument because 2012 is three years away. I expect BBI to be trading at $1 by then assuming corporate debt is cleared, SPARCS and NZ bonds are redeemed and distributions have resumed.

However, if the BBI security price was still in the bathroom in 2012, all the dilution would be happening in the 20 day period prior to conversion. The damage for BBI holders would be happening at that time when they are working out the weighted average price. Sure, maybe for a short time after conversion there would be some pressure but that's a short term problem.

As I say, I think it's all hypothetical anyway.

 

[Tysonboss1]

I agree with what you are saying, but do you think perhaps some of the dilution is likely to take place in the market after the conversion, due to general bearishness, offloading, etc...therefore pushing down the price and effectively diluting your investment cash value?

If after the physical dilution of the issuing of more BBI has occurred, there is alot of selling driving down the price creating a temparary over supply of BBI on the market at a discounted price, I will happily be there to help soak up the excess.

However, beppa is still 3 years away (holy smoke I will be 30), it will be a different world by then BBI may even be over a $1 by then.

 

[hardyakka]

A poor lost soul over the road wrote this classic:

"BBI and BEPPA are rowing the same boat. BEPPA turns into BBI ords.

If there is more dilution now, it makes it even worse for BEPPA as BBI share price will be lower upon dilution.

Think about it."

I think he should have a long hard think about it. The price of BBI at BEPPA conversion date is meaningless to BEPPA holders. The lower the price, the more BBI shares we receive.
If BBI is 5c, we receive 20 BBI shares for every BEPPA.
If BBI is 1c, we receive 100 BBI shares for every BEPPA
If BBI is $1, we receive 1 BBI share for every BEPPA.

I cannot believe a person with 20+ years of finance experience cannot comprehend the simplest of matters. Folks, be careful who you listen to.

BB,

Dont forget that you are referring to that place "across the road", the mods there have an IQ of a squashed mozzie.

Cheers

 

[banska bystrica]

LOL hardyakka.

There are lots of ifs and buts over the next three years but it is not unrealistic to see a BBI price in excess of $1 by then. It's current NAV is $1 NOW.
I think the following has to happen between now and 2012 and we will see a 20 bagger from here on BBI:

1. Assets sales
2. Pay out corporate debt and SPARCS (added in SPARCS assuming the new conditions are voted on)
3. Resume distributions.

Funny that, it's the APR plan I wrote about in November 2008. It's going to take time but I'm patient.

 

[Viva_Las_Vegas]

Banksa I was hoping you could explain this as I am a newbie. And before I continue I understand the market is irrational right now, but this does not make any sense to me.
Wednesday we saw the BBI SP go up nicely with massive volumes being turned over. As it so happended BBI made an announcement about the DBCT sale. At this point I would have thought the SP would continue to climb given the SP rose on the anticipation of that announcement, the next day it lost all of that momentum. I do not get it.....the potential news of them selling assets to clear ALL corporate debt and then we go backwards?
Surely it could not have been due to the SPARCS announcement today as I am sure most experienced players such as yourself would have already known about the pending SPARCS date yesterday etc. So if dilution due to SPARCS was to scare people off, why the hell would so many buy up on Wednesday?
I have taken your advice and an not sweating on 1 & 2 cent shifts. I too am now in the long haul and will top up when prices drop to average out my overall price. But what has happened over the last 2 days with the SP has me baffled. (Not to mention 5 consecutive positive days on the ASX).

Any light you could shed for me would be great!

PS: What are your thoughts re dividends vs dividend reinvestment to get more shares?

 

[TheAbyss]

It's a hypothetical argument because 2012 is three years away. I expect BBI to be trading at $1 by then assuming corporate debt is cleared, SPARCS and NZ bonds are redeemed and distributions have resumed.

However, if the BBI security price was still in the bathroom in 2012, all the dilution would be happening in the 20 day period prior to conversion. The damage for BBI holders would be happening at that time when they are working out the weighted average price. Sure, maybe for a short time after conversion there would be some pressure but that's a short term problem.

As I say, I think it's all hypothetical anyway.

How do you come to $1 per share for BBI in 2012? What happens if a hedge fund calls for and gets BBI wound up in the interim? What does BEPPA return if there is no BBI?

Not saying that this can happen however do note that a call for exactly this has been made by TCI for BBW to be wound up and the assets sold.

Just curious.

 

[investorpaul]

What are your thoughts re dividends vs dividend reinvestment to get more shares?

I was thinking about the Divs the other day as well, say BBI does go to $1 again and reinstates a div of between 5 and 7 cents pa. Then those that bought for between 2 and 7 cents over the last couple of weeks/months will effectively get 100% div yield on their initial investment (of course its all hypotheticals at the moment).

 

[banska bystrica]

The Abyss,

OK, you are talking about the proposal put for forward by a large shareholder in BBW? That is not a "wind up" of BBW but rather a proposal to dispose of assets in an orderly fashion and return the cash to BBW shareholders.

I would LOVE to see BBI do that. Sell every asset at book value or better. That would enable full repayment of BEPPA ($1 face value + 3c in deferred interest payments) and the net result would be BBI holders receiving approximately $1 per BBI.

REMEMBER: BEPPA holders get paid IN FULL before BBI holders receive anything.

 

[banska bystrica]

I think all on this forum who are interested in BBI/BEPPA should read the Investor Pack released with the interim result.

I refer to the BBI Consolidated Summary Balance Sheet as at 31/12/2008:

Current Assets: $928.1M
Non-current Assets: $14.519Bn
Total Assets: $15.447Bn

Current Liabilities: $1.998Bn
Non-current Liabilities: $11.084Bn
Total Liabilities: $13.083Bn

NET ASSETS: $2.364Bn

Now, included in the interest bearing liabilities is the debt owed to BEPPA holders of $780M.

Think of BEPPA as a 2nd mortgage. We, the BEPPA holders are owed $780M by BBI and in a sell down scenario, the banks get their debt back first, then NZ bond holders, then SPARCS, then BEPPA. BBI get the crumbs after that and right now, the crumbs are worth $2.364Bn which is close enough to $1 per BBI security.

 

[Viva_Las_Vegas]

Banksa,
So given the strong possibility of SPRACS holders voting to renew the trust deed or whatever it is, could actually be seen as SPARCS holders having faith in either the long term survival of BBI, faith in the balance sheet you just posted, and faith in the assets fetching book values and above ensuring NZ bond holders, then SPARCS get paid. Essentially if they were panicked they would opt for BBI conversion, sell out to get whatever cash they could...right?

 

[banska bystrica]

Banksa,
So given the strong possibility of SPRACS holders voting to renew the trust deed or whatever it is, could actually be seen as SPARCS holders having faith in either the long term survival of BBI, faith in the balance sheet you just posted, and faith in the assets fetching book values and above ensuring NZ bond holders, then SPARCS get paid. Essentially if they were panicked they would opt for BBI conversion, sell out to get whatever cash they could...right?

Yes. If I were a SPARCS holder and did not think BBI would survive, I would be desperately hoping they voted NO to the new terms, converted all my SPARCS into BBI and then I would sell the new BBI as soon as possible.