BBI - Babcock & Brown Infrastructure

[banska bystrica]

Wow, that's a nice little jump this morning (BEPPA), hopefully it will fall back a bit later today.

Was going to buy on Thursday afternoon but got busy and missed the close. Angry at myself now

My broker had a client keen to sell 440,000 BEPPA at 9c. He asked if I was interested and I couldn't resist so I bought them. Maybe I'm wrong but I think 9c is a steal long term, just like PD Ports was at a steal in 2005.

 

[banska bystrica]

This might be of some interest to BBI/BEPPA holders. It shows the amount of corporate debt to be paid back or re-financed and the dates. The majority of the risk with BBI is the corporate debt. Remove corporate debt and BBI is safe.

Feb 2010: GBP 85M ($173M)
Dec 2010: NZ$275M ($220M)
Feb 2011: AUD$223M ($223M)
Dec 2011: USD$510M ($730M)

Total corporate debt is approximately $1.35Bn

So, BBI need to come up with $173M within 10 months. You can see that the timetable to sell assets is not as urgent as the market is saying. That gives BBI more than enough time to get robust prices for their assets.

 

[Mitsimonsta]

Yes, I like those figures BB. I think it might just pay off now, I cannot believe that the market is not going mental on these already. The 2011 figures are slightly scary but short-term is much better than the SP indicates.

How many BEPPA do you hold now BB? Average buy? You would have to be well over the 1M mark now I should think. If you don't want to put it out publicly, that's cool.

Wish I had $40K lying around to buy shares. I'm also slightly glad that if BEPPA does hit $1, I don't have to pay the CGT on those 440K units either

 

[banska bystrica]

How many BEPPA do you hold now BB? Average buy? You would have to be well over the 1M mark now I should think. If you don't want to put it out publicly, that's cool.

It's not really important to anyone but me, but I have a multiple of that figure you quoted. Average buy price is around 8c.
I've still got a stack of BBI which I will slowly sell down as the BBI price rises to fund my BEPPA purchases. That way, I end up owning the same amount of BEPPA for the same dollar cost of BBI.
BEPPA are currently owed over 2c per BEPPA in accrued interest. That's a very tidy sum awaiting. By end of calendar year, that figure will be over 4c.
As time passes, BEPPA becomes more and more valuable.

 

[Mitsimonsta]

It's not really important to anyone but me, but I have a multiple of that figure you quoted. Average buy price is around 8c.

Well, it is interesting to me (and I would suggest other people in this thread too) inasmuch as you have actually put your money where your mouth is.

Even if you simply doubled the number I mentioned, that is a pretty serious holding. And it makes sense that someone as yourself who has put possibly 200+ hours of hardcore research into BBI/BEPPA and has the confidence in the stock would pump quite an amount of money into it.

I hold (some insignificant amount compared to yourself) BEPPA too, so I am betting we are both right. I only hold ~18K units. In fact, you know exactly what I hold (see PM).

I've still got a stack of BBI which I will slowly sell down as the BBI price rises to fund my BEPPA purchases. That way, I end up owning the same amount of BEPPA for the same dollar cost of BBI.

Without giving out financial advice, it sounds like a reasonably sensible idea. If I had BBI then I would be doing the same, or possibly selling them to fund 50% BEPPA and 50% something else. I still feel that I want to diversify a touch more, and increase holdings in the equities I already have. My financial position/portfolio and yours are completely different and we have different aims and objectives.

BEPPA are currently owed over 2c per BEPPA in accrued interest. That's a very tidy sum awaiting. By end of calendar year, that figure will be over 4c.
As time passes, BEPPA becomes more and more valuable.

1000% agree. Even with my piddling holding (a single $1.3K buy), I am due nearly $360 in accrued interest which is a massive proportion of my outlaid money.

I will be buying more, as I think I mentioned previously, I would love about 100K units but I don't know if I will be able to accrue them quickly enough before Joe Public (and John Fund) gets wind of the gains that are possible here.

 

[jeffTH]

For your information, my research into unpaid and deferred dividends for BEPPA is -

Oct 08 - Dec 08 $0.0204
Jan 09 - Mar 09 $0.0125
Apr 09 - Jun 09 $0.0106 ex date of 10.06.09 should
the dividends be re-instated.
Total $0.0435

May they continue to grow!

 

[banska bystrica]

For your information, my research into unpaid and deferred dividends for BEPPA is -

Oct 08 - Dec 08 $0.0204
Jan 09 - Mar 09 $0.0125
Apr 09 - Jun 09 $0.0106 ex date of 10.06.09 should
the dividends be re-instated.
Total $0.0435

May they continue to grow!

You're 100% correct jeffTH. The deferred payments up to and including June 30 2009 are indeed 4.35c per BEPPA.

 

[Viva_Las_Vegas]

Yes, I like those figures BB. I think it might just pay off now, I cannot believe that the market is not going mental on these already. The 2011 figures are slightly scary but short-term is much better than the SP indicates.

How many BEPPA do you hold now BB? Average buy? You would have to be well over the 1M mark now I should think. If you don't want to put it out publicly, that's cool.

Wish I had $40K lying around to buy shares. I'm also slightly glad that if BEPPA does hit $1, I don't have to pay the CGT on those 440K units either

How is it that you don't have to pay CGT? Is BEPPA exempt? I was of the impression any sort of gains from "the markets" were CG's. Enlighten me mitsimonsta

 

[Mitsimonsta]

So at the current $0.091 for BEPPA and BBI trading at $0.066, I make BEPPA trading 1.85c discount to nominal value against BBI?

(That is, BBI value plus deferred distribution value of 4.35c)

How is it that you don't have to pay CGT? Is BEPPA exempt? I was of the impression any sort of gains from "the markets" were CG's. Enlighten me mitsimonsta

I meant the CGT on 440K units, let alone the amount that BB holds which could be quite a scary amount of money if BEPPA does hit $1.

I will be lucky to hold 100K units. If I do get that many at a reasonable price, I will be very happy and it will help set me up financially.

CGT applies to BEPPA like all other 'profit' that you make. I was only referring to BB's buy of 440K units of BEPPA.

 

[Mitsimonsta]

Price is up 1.1c for the day, now trading at 9.5c as I type this.

The question is if this is the start of a market re-pricing of the security?

EDIT: There's a 3:1 buy pressure on BEPPA.... the price will only rise from here now.

 

[banska bystrica]

Price is up 1.1c for the day, now trading at 9.5c as I type this.

The question is if this is the start of a market re-pricing of the security?

No. The real re-rating will take place once DBCT sells. 9.5c for BEPPA is still a ridiculously discounted price to face value. I believe once DBCT sells and settles, BEPPA will probably trade in line with other listed hybrids, that is a discount of 40-50% of face value. That discount will then close as maturity approaches.

 

[Mitsimonsta]

Well, in that case they are seeing the 1.85c/unit discount on BEPPA and moving to secure it.

It's a bit less than that now with BEPPA at 9.5c but it is still in the region.

 

[fuzzie]

Interestingly, a million changed hands after the bell. I don't think you can say the BBI re-rating has started until the BBI price itself is going up by more than .2 on the day. The selling profile on BEPPA however seems to have changed. There are no longer 100k lots sitting on all .1 price increments. The forced sellers might be out of the market, but the question is have they just taken a long Easter break?

It's my unfounded speculative guess there might be a BBI price spike in May if the SPARCS reset gets rejected. Management, in the interests of existing shareholders, might find some news worthy information to release to the market around the time the share price is being calculated for redemption. This could easily be a quite correct update on the DBCT sale progress seeing the advising bankers would have had 6 weeks to work through the offers by then.

 

[Mitsimonsta]

Looks like you got a bargain on your parcel BB, that's a fairly hefty rise for the day.

I grabbed another small parcel, up to just over 25K units. The PM has not stimulated me yet, or there would have been a much bigger buy.

 

[mark_au]

The question is now, when BBI/BEPPA comes good, at conversion time does one

take the cash and run ,
or
convert beppa into bbi shares.
I feel that future dividends cannot surely be sustained at around 14c per year as in the past , given the (hopeful) sale of key parts of income producing infrastructure. Wont this mean that BBI will be less attractive as a long term income producing asset ???

which way to jump.. i guess will be decided closer to 2012

 

[Mitsimonsta]

TL;DR so I will summarise:

At BEPPA conversion time does one:

• take the cash and run, or
• convert BEPPA into BBI shares

which way to jump.. i guess will be decided closer to 2012

Basically, it depends on the situation in 2012. I actually think that there might be a vote passed to reset the date of BEPPA conversion before maturity, along with a higher interest rate.

Alot will depend on what has been sold and the conversion offer that is placed on the table. If interest payments on BEPPA have resumed, then that will make things interesting.

I would agree that the 14c dividend will almost certainly fall if DBCT is sold.

 

[Viva_Las_Vegas]

Speaking of votes, I have been searching online but with no success as to the outcome of the most recent SPARCS vote.

Mitsi, do you have any info on the outcome of it? Last I heard only a small proportion of holders voted (from memory).

I guess SPARCS and one other have to be paid before BEPPA holders see a penny.

Perhaps another scenario could see BBI buying up BEPPA from the market at sub $1 hence halving their debt. Of course this scenario could only be played out if they sold DBCT and had cash to play with instead of totally paying out BEPPA holders.

If I were in that position I would rather buy back my debts at half price rather than paying the debt in full. Wouldn't you?

 

[Mitsimonsta]

Speaking of votes, I have been searching online but with no success as to the outcome of the most recent SPARCS vote.

Mitsi, do you have any info on the outcome of it? Last I heard only a small proportion of holders voted (from memory).

It was not a vote, but the option of cashing out of SPARCS or converting into BBI. About 17% were converted for cash or BBI shares: http://bbinfrastructure.com/media/410727/709854.pdf

Perhaps another scenario could see BBI buying up BEPPA from the market at sub $1 hence halving their debt. Of course this scenario could only be played out if they sold DBCT and had cash to play with instead of totally paying out BEPPA holders.

If I were in that position I would rather buy back my debts at half price rather than paying the debt in full. Wouldn't you?

I would, but they are currently are not allowed to buy back BEPPA until SPARCS is dealt with. They would also have to pay all distributions until the BEPPA interest was paid out in full.

They know that once SPARCS is dealt with and BEPPA is paid, the price of BEPPA would come up. But yes, if all those conditions are met, then they could buy back the debt at a discount.

 

[Malindidzumu]

I feel that future dividends cannot surely be sustained at around 14c per year as in the past , given the (hopeful) sale of key parts of income producing infrastructure. Wont this mean that BBI will be less attractive as a long term income producing asset ???

I very much doubt that the future dividends from just about any stock listed on the ASX will be sustained at the levels they were at prior to the GFC, not for a very long time at least.

In BBI's case I would be very happy to receive a 10c annual distribution in the future, but I would settle for less all things considered just as long as BBI survives and remains listed.

As for BBI being less attractive to investors as a source of long-term income, I guess that depends on how many shares were bought and what price was paid for the shares and how long each individual investor is willing to hold onto their investment in BBI, i.e. what is each individual investor's definition of long-term?

If the shares were bought recently with the price of BBI being less than 10c a share then the distributions on offer in the future don't have to be very substantial for individual investors to receive very attractive returns on their investment.

 

[hardyakka]

No. The real re-rating will take place once DBCT sells. 9.5c for BEPPA is still a ridiculously discounted price to face value. I believe once DBCT sells and settles, BEPPA will probably trade in line with other listed hybrids, that is a discount of 40-50% of face value. That discount will then close as maturity approaches.

I have been looking at a few hybrids and there is some pretty good value out there, but nothing comparable with BEPPA, but I am looking at GNSPA.

Having been acquiring BEPPA for several months now I do not intend on acquiring any more unless prices ease back a bit, which is unlikely. I would estimate that I hold between a third and a fifth of BBs holding.

In my view we are now in a waiting period, and gradually the market will start to re-examine BBI and wake up to it, especially if the markets hold up. The latest date for this being when the DBCT sale is announced, and considering that firm offers must be in by June 30, that is not far off.

Its a bit like the missus or g/friend saying "no, you cannot have another beer you are sloshed". So what to do? Well there is always spirits and wine!! So on that basis I will be looking at BBI now.

Good luck all.

Cheers