BBI - Babcock & Brown Infrastructure

[ricee007]

who are the potential buyers for dbtc? what are the underlying obstacles obstructing it's sale? are potential buyers able to raise funds to acquire in this current climate?

also if you dont mind me asking, are you guys that are currently holding both beppa and bbi skewing your holdings towards beppa?

BHP and RIO use that port.... and are begging for extended capacity. They (and the other medium sized players that use the port) would use nearly twice the current capcity easily.

BHP and Rio are the main two...but, the minor players could create a consortium (not as likely).

There are also insurance funds / superannuation funds that would love an asset with pretty much guaranteed cash flows. However, arguably, it won't return an appropriately high enough ROI. This is certainly debateable though. I would disagree.

Chinalco is trying to offer Rio a $20Bn line of credit. Wow. If Rio could get this line of credit, and with BHP cashed up (from trying to takeover Rio last year). Could see a very healthy bidding war.

Those holding BBI/BEPPA are skewing, generally, towards BEPPA. I'm only BEPPA.

BBI has the potential to be worth > $1.20 June 2011. BEPPA doesn't. I bought in for (avg) $0.10. I'll be completely satisfied if I just get my $1.20 from BEPPA!

BanksaBys has >4,000,000* BEPPA (IIRC, it could be BEPPA/BBI combined that are over 4M)... he said just recently that he would convert to BBI if BEPPA reached $0.50 this year. Seemingly thinking that if BEPPA are $0.50 this year, if BBI have NTA per share of $1.50 and are corporate debt free, in a rapidly improving sharemarket, then BBI will be worth >> $1.20 June 2011

Personally, I would say there is a 51% chance of BEPPA hitting $0.50. But, of course, that is just speculation on my behalf. If BEPPA hit $0.50 this year (with BBI close behind), there would seemingly be a good chance of BBI being >> $1.20 June 2011.

My risk profile would result in me being content with my 1200% increase and not risking (seemingly 'sure thing') for the risk of going BBI.

Besides... Recently, BEPPA and BBI were trading equally priced. BBI may have, for a moment, even have been more expensive.

BEPPA is owed 4.35c in interest.... BBI is owed $0 in interest.

If BBI and BEPPA are each 10c, and one of them 'owes' you 4.35c....


*I apoligize if anyone thinks this is rude, but, I mean, he has said 'multiples of a million' and '4million' and then 'bought 150,000 more' in this thread. So, if people looked back they could find it without me

 

[ricee007]

My imagination, or the forum doesn't allow post editing past a couple of minutes?

As to obstacles?
Management only accepting a bid for a minority (49%) stake in it would be the main 'risk' in my opinion. Having said that, the management would probably know better than I about if accepting a minority offer would be best or not.

It would have to get governmental approval, but I don't think anyone anticipates that as a problem.

Having the ability to raise enough? Besides the (ever-present) opportunity to use shares to purchase assets / companies... I touched on the ability that BHP has to pay, and the ability that Rio may have to pay. If Chinalco gets blocked by KRudd, Rio would still have the means (IMHO) to offer enough to purchase it, but would be less likely too.

Having said that, BHP MIGHT need the 2.5Bn-3.5Bn to expand ODX. But that has been in SERIOUS planned development for years, the decision to mine was (effectively) made over 3 years ago {pending Govt approval}. That certainly would have already been factored in by BHPs accountants.

 

[banska bystrica]

I do not think BHP and RIO are the main contenders for DBCT. My favs are QIC or a consortium of DBCT users not including BHP and RIO. I think the favoured option is for a 49% sale. I would prefer 100% but hey, I'm not running BBI.

 

[ricee007]

I do not think BHP and RIO are the main contenders for DBCT. My favs are QIC or a consortium of DBCT users not including BHP and RIO. I think the favoured option is for a 49% sale. I would prefer 100% but hey, I'm not running BBI.

Hmm,

I would put money on Rio, to be honest...

BHP seems to like specialising in mining and focusing on just that (not a really diversified company!)... still would surely interest them.

Why QIC? Just rumours you have heard, or logic behind your thoughts?

As I'm sure you know, BBI have said that they are asking for tenders for a 49% sale... but would accept a 100% offer, if the price is right.

The comments regarding 100% seem to have come after the 49% announcment (IIRC). This indicates that maybe (just maybe) an entity has asked BBI if it could buy it out-right.

Buying it outright would make more sense for a user of DBCT, as they could then make decisions regarding it (expansion!), and would be more likely to pay a control premium for that then a life-insurance / investment fund that wants to maximise ROI.

Are you able to tell me when SPARCS matures, and explain about what would happen in a reset to BEPPA? What % vote is needed by BEPPA holders for this to succeed? Would it be 'forced' to everyone if enough people voted, or would people still have a choice if they didn't want to?

 

[banska bystrica]

I think RIO are very long odds. I would be very surprised if they were on the shortlist of three.

DBCT fits QIC's investment criteria perfectly. I also see a consortium involving Macarthur Coal as a definite possibility.

Don't worry about SPARCS, BEPPA, reset dates and possible scenarios. BEPPA is too far off (2012). The main game is asset sales.

 

[ricee007]

I think RIO are very long odds. I would be very surprised if they were on the shortlist of three.

DBCT fits QIC's investment criteria perfectly. I also see a consortium involving Macarthur Coal as a definite possibility.

Don't worry about SPARCS, BEPPA, reset dates and possible scenarios. BEPPA is too far off (2012). The main game is asset sales.

Hmm, perhaps. But, I mean, BEPPA could offer a reset Q42009.

Couldn't it?

But, you are right to a large extent.

I can not fathom BBI falling if DBCT gets 100% sold.
I can BARELY fathom BBI falling if DBCT gets 49% sold.
I can BARELY fathom BBI not selling at least 49% of DBCT.
As long as BBI doesn't fail, I can BARELY fathom them not being able to honour BEPPA for $1.20 June 2011.

So, I can BARELY, BARELY, fathom not getting $1.20.

Having said that, it would be nice to know what happens in the case of a reset, etc.

When SPARCS mature (/if that is likely to get rolled over or paid out, does it mature Dec 2009?), what happens there MAY change if I roll over to BBI from BEPPA. Etc.

EDIT:
1.11M buyers for BEPPA at 0.105.
2M buyers for BEPPA at 0.104
3.19M sellers for BEPPA.

I can't see BEPPA heading south of 1.04 for a long time, despite the ASX200 dropping at the moment, quite rapidly.

 

[investorpaul]

EDIT:
1.11M buyers for BEPPA at 0.105.
2M buyers for BEPPA at 0.104
3.19M sellers for BEPPA.

I can't see BEPPA heading south of 1.04 for a long time, despite the ASX200 dropping at the moment, quite rapidly.

BEPPA has in my opinion established itself above the 10 cent mark, unless there is bad news/a long delay in new info it is hard to see it dropping below that barrier easily.

Last week and the week before when it had its run it did have trouble getting over the 12/12.5c barrier so a close above that would be a positive sign from a technical point of view.

As mentioned though we really do need to see a positive announcement to have the price really march forward, hopefully that is less than 2 months away now.

 

[Largesse]

Hmm, perhaps. But, I mean, BEPPA could offer a reset Q42009.

Couldn't it?

But, you are right to a large extent.

I can not fathom BBI falling if DBCT gets 100% sold.
I can BARELY fathom BBI falling if DBCT gets 49% sold.
I can BARELY fathom BBI not selling at least 49% of DBCT.
As long as BBI doesn't fail, I can BARELY fathom them not being able to honour BEPPA for $1.20 June 2011.

So, I can BARELY, BARELY, fathom not getting $1.20.

Having said that, it would be nice to know what happens in the case of a reset, etc.

When SPARCS mature (/if that is likely to get rolled over or paid out, does it mature Dec 2009?), what happens there MAY change if I roll over to BBI from BEPPA. Etc.

EDIT:
1.11M buyers for BEPPA at 0.105.
2M buyers for BEPPA at 0.104
3.19M sellers for BEPPA.

I can't see BEPPA heading south of 1.04 for a long time, despite the ASX200 dropping at the moment, quite rapidly.

Ricee07

"Please don't quote me... but, off the top of my head, I THINK that there are 778,000,000 BEPPA in the marketplace. "

Please explain to me how 1.1m on the bid at 10.5c is going to stop 770m odd off screen pushing the price down if it so wishes......

 

[ricee007]

Ricee07

"Please don't quote me... but, off the top of my head, I THINK that there are 778,000,000 BEPPA in the marketplace. "

Please explain to me how 1.1m on the bid at 10.5c is going to stop 770m odd off screen pushing the price down if it so wishes......

It won't by itself.
I don't think I said that the 1.1m at 10.5c bid will stop it.

I think I provided *SOME* evidence that it is unlikely to* in the short term. This would seem to provide some evidence of a base for the stock. Combined with past market experience, and, and in the past week it seems to have established itself as a >10c stock.

The comment immediately after mine was:
"BEPPA has in my opinion established itself above the 10 cent mark, unless there is bad news/a long delay in new info it is hard to see it dropping below that barrier easily."

It seems some people would agree with me.

Currently, there are more a fair bit more buy orders at 10.4 c or above than there are total sell orders. No-one is selling the stock for under 11.2c. And we have to wait till we get to 12c before we hit a cumulative total of 1M players.

As pointed out, barring bad news, it's nigh on impossible to see this falling under 10c in the short term. IMHO, it's hard to see this falling below 10.5c in the short term. *PERHAPS* 10.4c, I'll concede that. But, recent trading history seems to show it'll hold above 10.5c, or at the very least, above 10c.

*OK, more fairly, that it won't push under 10.4c in the short-term.

 

[Mitsimonsta]

I know Ricee from another place. Welcome to ASF.

I am speaking in terms of BEPPA here, but you can basically apply to BBI as well.

From watching what has been going on in the past few days, I feel it safe to say that there is enough accumulators of BEPPA - if only small investors like myself and the slightly bigger fish like IP, BB etc - to soak up unwanted units below 10.5c. I think what Ricee is trying to say is that there is support above the 10c level, and it would take some fairly seriously bad news to push it below that.

While trades have gone in at up to 12c recently, the volumes at that price have been low. When shares come onto the market at <10.5c then they are snaffled up reasonably quickly. I feel that alot of investors are looking at a 10c average buy price on BEPPA, and that is exactly my strategy on the hybrid.

I feel that the sale price of DBCT is somewhat rubbery. It could have some very strong support from the mining sector, either companies straight out wanting to purchase it, or running into a consortium of users as BB suggested. You then have the possibility of pension/super funds looking to get a regulated return on investment. Past that, you might find some infrastructure funds looking to take a slice of the pie also, but that is likely to be in the 20-35% interest region and possibly not quite enough for BBI to sell on it's own.

BB is quite sure that EBITDA for DBCT will be ~$240M for FY10. However, I do not share his enthusiasm for that figure. He has also mentioned 13x EBITDA as a sale amount previously, but his later comments above about a 12.5 multiple is more correct at the higher earnings. I tend to think that 13x is right IF the EBITDA is correct. I see it more like $220M-$225M which makes $2.85B-$2.9B.

The difficulty with Pension/Super funds is that they need the highest possible earnings on the lowest multiple to make decent money for their clients. Now if the EBITDA is $200M and they need to pay 14x or 14.5x to secure the facility, then the annualised return is going to be less - to the point of getting a better return from cash once things pick up a bit. If BB's $240M EBITDA is correct, the pension/super funds will come into play.

As a hybrid holder, the more interested parties for the purchase of DBCT, the better the chance of a good price for it.

 

[banska bystrica]

I have used $224M for 2010FY EBITDA.
There are three serious bidders about to be short listed for 49% of DBCT. The Fin Review is spot on with it's mail as per the Gloucester announcement today.

 

[investorpaul]

Todays Financial review states:

Elsewhere, it's said that Macquarie Capital is in the final stages of short-listing three parties for a the sale of a 49% stake in the Babcock and Brown Infrastructure's Dalrymple Bay Coal Terminal.

A consortium of miners including Xstrata has been sniffing around the asset for more than a year, but it would also make sense for some of the bidders interested in Asciano's port assets to be in the mix.

This means a number of things to me:

1. Firstly as BB also said, I expect this short list to be released shortly or at least rumours to emerge of who is on the list.

2. It still seems that BBI's preference is to sell a 49% stake. BBI management would obviously have run their own figures and would believe that a sale of only 49% will still ensure that the company is in a strong position to survive. Otherwise they would be pushing for a 100% sale.

Initially I thought that the run during part of last week/week before was due to short term traders looking for a "volatile" stock to trade, however it does appear that there are a number of long term buyers accumulating up to a 10 cent average.

If we are expecting an announcement before the end of the financial year, 55 odd days away, it cant be long before a few more articles are written mentioning the potential buyers.

I must admit my nerves had been swayed a bit with the quote regarding Euroports Put option and 35 m euro break fee. Obviously it is still a fairly unsteady ship, however I dont think it will take all that much (a sale and positive announcement should do it) to steady the ship.

 

[investorpaul]

I dont have access to live data at the moment (I'm on a public computer), but as per the asx website (20 minute delayed) BBI and BEPPA again traded at the same price, 11 cents.

I thought when this occurred last week it was a once off, very odd indeed. What are other peoples thoughts on this? Perhaps this is because people are happier with the prospects of the company and therefore dont mind holding equity (BBI) as opposed to debt (BEPPA) even though they rank lower in the event of a wind up

 

[boff]

I dont have access to live data at the moment (I'm on a public computer), but as per the asx website (20 minute delayed) BBI and BEPPA again traded at the same price, 11 cents.

I thought when this occurred last week it was a once off, very odd indeed. What are other peoples thoughts on this? Perhaps this is because people are happier with the prospects of the company and therefore dont mind holding equity (BBI) as opposed to debt (BEPPA) even though they rank lower in the event of a wind up

I think it's just noise. Both prices are so low it's almost inevitable that they'll touch. Once prices move up towards say 20 cents I think a gap will open up.

 

[banska bystrica]

I think Macquarie Capital are leaking like a sieve on DBCT. The Fin Review is on to it and news cannot be far off. Everyone has had ample time to get set. No excuses.

 

[investorpaul]

I think Macquarie Capital are leaking like a sieve on DBCT. The Fin Review is on to it and news cannot be far off. Everyone has had ample time to get set. No excuses.

Quick Q BB, why would Macquarie Capital leak news, would it be for strategic purposes so bidders know there is other interest or is it merely to gloat that they are about to complete another multi billion dollar deal???

 

[fuzzie]

At a guess I'd say we are in the 20 trading days leading up to 17 May for calculation of the VWAP for SPARCS redemption. Even if you think the SPARCS reset will get voted through, it wouldn't hurt to have the share price bumped up a bit, just in case.

On the other hand if you think the SPARCS holders are going to reject the reset terms I'd expect BBI holders to be bailing out about now.

 

[Mitsimonsta]

Quick Q BB, why would Macquarie Capital leak news, would it be for strategic purposes so bidders know there is other interest or is it merely to gloat that they are about to complete another multi billion dollar deal???

You'd have to say both IP.

The gloating comes from an MQG company advising a BNB company. 18 months ago, that was absolutely unthinkable. You would have been sent to the loony bin.

They would also be trying to pump the price up - while the advising deal would be confidential, you can bet there would be much better commission if the sale breaks the market expectation of say $2.5Bn-$2.6Bn.

 

[ricee007]

You'd have to say both IP.

The gloating comes from an MQG company advising a BNB company. 18 months ago, that was absolutely unthinkable. You would have been sent to the loony bin.

They would also be trying to pump the price up - while the advising deal would be confidential, you can bet there would be much better commission if the sale breaks the market expectation of say $2.5Bn-$2.6Bn.

Hmm, well, it is looking more likely to be a 49% sale....

So, what price would that get?

If 224*12.5 is the fairest evaluation we can come up with... and that includes a control premium.....

Would 112 * 11.5 = $1.2-1.3Bn be a more realistic sale price?

Would 'the market' like that?

How much corporate debt does BBI have? 2.5Bn or so?

 

[banska bystrica]

How much corporate debt does BBI have? 2.5Bn or so?

$1.3Bn................................................................................................