BBI - Babcock & Brown Infrastructure

[banska bystrica]

i hope your right, but im not confident enough to sell my holding now and re-enter IF it falls to those levels. With about $60k worth, the risk of miss timing the situation and selling now and then not getting a rebuy oportunity far outways my rewards for just holding.

For sure. I agree it is very risky to be selling now and hoping to buy back cheaper. I am not selling any BEPPA. Whilst my gut feeling is that Euroports will not settle, I could very well be wrong therefore I am sitting tight.

 

[banska bystrica]

People need to be aware of the short term downside here. Do not under-estimate the potential downside if Euroports does not settle. I'm not being alarmist. I just don't want to see people whinging and carrying on if we see BBI and BEPPA down near the November lows. If it doesn't happen, well and good. We then move on and await DBCT news.

 

[nathanblack]

People need to be aware of the short term downside here. Do not under-estimate the potential downside if Euroports does not settle. I'm not being alarmist. I just don't want to see people whinging and carrying on if we see BBI and BEPPA down near the November lows. If it doesn't happen, well and good. We then move on and await DBCT news.

great post. i agree. be alert not alarmed. expect the worst but hope for the best.

my gut still says an announcement(not settlement) RE: DBCT will happen about the same time, hopefully just before, and the good news will offset the bad. could be wrong though.

and certainly no news from DBCT and bad news from euroports will be a huge blow, and if its followed up by disappointing news from dbct we will be in for a rough ride. then followed up again by sparcs conversion.

if anything atleast we will see some volatile times, and people need to be aware they could make or LOSE 50% in a week. so better prepare yourselves now and decide an exit strategy. ie understand the risks and decide to ride out the negatives or get out while you can or atleast have a stop loss in place.

cheers

 

[drsmith]

I stand by that 100%. When a forced bank sweep is in place, you are in quasi administration. It doesn't mean you are history. It doesn't mean investors cannot make a fortune out of it.

It must concern you though that around the positive speculation in this thread, people are failing to understand the true situation.

Now drsmith, myself and others are still waiting with baited breath for some concrete figures that back up your opinion. If you cannot provide figures, your opinion is not worth very much even though you are entitled to have one.
I suspect your knowledge of the BBI fundamentals are so lacking that you don't have figures to back your opinion up. Prove me wrong.

I have offered rationale behind my opinion, rationale which you seem to either overlook or ignore. You are welcome to comment on specific points I have made if you wish.

As for the prospects of a restructure one possibility is that BBI's Board and lenders may reach agreement on converting some of the debt to equity with the result being that existing unitholders are severely diluted. Again I refer to Centro as an example.

As for BEPPA holders they vote on a restructure if changes to BEPPA terms are proposed but that could well be a choice between a very small fraction of their face value or administration if such a vote fails.

 

[banska bystrica]

It must concern you though that around the positive speculation in this thread, people are failing to understand the true situation.

Why would it concern me? I'm not here to hold everybody's hand and assure them everything will work out fine. It's risk/reward. Moderate risk/massive reward when it comes to BEPPA. Note I do not own any equity (BBI). Sold out after Corus news at circa 17c.

 

[random]

Dr Smith,
What you fail to understand is that we do understand the true situation but you cant understand that we do understand, yet accept it for what it is.

Got it yet?

 

[banska bystrica]

I have offered rationale behind my opinion, rationale which you seem to either overlook or ignore. You are welcome to comment on specific points I have made if you wish.

You have offered about as much rationale as the local press covering BBI who have no idea what they are talking about when it comes to matters involving BBI. One poor journo even mention Babcock and Brown (BNB) having to sell DBCT. My goodness, how can BNB sell DBCT when they don't even own it?

Forget about your general "rationale" drsmith and give me some numbers that show BEPPA being worthless.
Rationale is another way of saying "I have no idea why I think this way but I am going to say it anyway".
Solid numbers drsmith, nothing less, or you will be ignored and your posts will not be responded to in future as far as I am concerned. Happy to hear the bearish view but give me some evidence. Where are the breach of debt covenants? Where are the asset write-offs? Show me how they lose $4Bn worth of equity to make BEPPA worthless?

 

[drsmith]

Show me how they lose $4Bn worth of equity to make BEPPA worthless?

1) Asset writedowns.
2) Lenders charging more for credit upon refinance thereby reducing (or eliminating) unitholder equity over time.
3) Lenders accepting equity in exchange for credit with the result being a severe dilution for existing unitholders.

With covenants, arn't they only in relation to existing debt agreements. What happens when the debt is due to be renewed ?

Also, how do you think BBI's directors will act if faced with a choice between sacrificing their own jobs and sacrificing existing unitholder equity in any restructure to satisfy lenders ?

 

[select]

As I said over at HC, I'm back in BBI at average 7.4c and I have no idea if that will hold but what I do know is that at least one of the big buyers is back in action chomping away. By the course of sales data, they seemed to acquire about 10M today and they took out about 3M on the close and it finished at 7.9c.

You commented that you sold out of BBI at circa 17c but you did buy back in at average 7.4c post the corus news. See the above quote.

You must have taken a stop loss opportunity or do you still hold them?

 

[drsmith]

Dr Smith,
What you fail to understand is that we do understand the true situation but you cant understand that we do understand, yet accept it for what it is.

For a good example to the contrary, review posts 1783, 1820 and then finally the first post on page 80.

 

[banska bystrica]

You commented that you sold out of BBI at circa 17c but you did buy back in at average 7.4c post the corus news. See the above quote.

You must have taken a stop loss opportunity or do you still hold them?

Neither so you are wrong again Constable select. Take a look at the 2 month chart for BBI. Note my purchase of a parcel near the start of that two month chart at average 7.4c. Now note the price action after I bought in up until June 14. Remember select/macrae12, I sold all those BBI PRIOR to leaving Australia for my trip to Eastern Europe.

 

[banska bystrica]

All BBI followers, please take note I will not be responding to anymore posts by "select" or "drsmith". They are clearly only coming onto this thread to stir so if I don't take the bait anymore, please understand.

 

[select]

All BBI followers, please take note I will not be responding to anymore posts by "select" or "drsmith". They are clearly only coming onto this thread to stir so if I don't take the bait anymore, please understand.

BB,

I'm not trying to be difficult or stir.

I simply refreshed your memory about buying BBI post the Corus news. This fact is contrary to what you posted in the post that I responded to.

It's your business why you bought BBI after the Corus news but it does fly in the face of your selective memory and what you would have people believe.

I suppose we can all create a super human investor if we choose to and forums can facilitate the process and the creation of a myth if certain characters have a penchant for abusing the system.

Am I being a trouble maker? Maybe not.

All the best, sincerely!

 

[hardyakka]

1) Asset writedowns.
2) Lenders charging more for credit upon refinance thereby reducing (or eliminating) unitholder equity over time.
3) Lenders accepting equity in exchange for credit with the result being a severe dilution for existing unitholders.

With covenants, arn't they only in relation to existing debt agreements. What happens when the debt is due to be renewed ?

Also, how do you think BBI's directors will act if faced with a choice between sacrificing their own jobs and sacrificing existing unitholder equity in any restructure to satisfy lenders ?

Apologies as I havent been able to speak with Helen yet, simply snowed under at work.

Dr Smith-Whilst you are entitled your views, I must admit that I have not seen any reasonable data supporting these.

Regarding your points above:
Writedowns-The assets are not revalued and cannot be compared to a property trust, apples and pears. What writedown do you estimate for total BBI assets overall? I estimate a net positive of $2B on top of existing NTA ie about $4B NTA, what about you. (I have previously posted my rationale for this number). What is the NTA per your calcs after all writedowns??

Debt-Coversion of debt to equity is beneficial for BEPPA. As for increased interest charges, $4B of net (ie income less increased expense) additional expenses in the form of additional interest cost have to be incurred before BEPPA is affected one cent.

At a sky high rate increase of 400bps, that equates to $100B of debt for one year or $10B of debt for 10 years before the $4B of NTA is wiped out. After that 10 years BEPPA will be affected for the first time.

Dilution of equity holders, well I dont hold equity. But then I agree I will give up 40 cents of the $1 face value so I get paid 60 cents. Even then I am losing 40 cents in the $

As a final observation I think a previous poster summed it up nicely. I think you fail to understand that we do understand the risk profile of BEPPA and BBI and invest accordingly. In my case I have set aside funds to take advantage of short term price movements.

Cheers

 

[ricee007]

Apologies as I havent been able to speak with Helen yet, simply snowed under at work.

Dr Smith-Whilst you are entitled your views, I must admit that I have not seen any reasonable data supporting these.

Regarding your points above:
Writedowns-The assets are not revalued and cannot be compared to a property trust, apples and pears. What writedown do you estimate for total BBI assets overall? I estimate a net positive of $2B on top of existing NTA ie about $4B NTA, what about you. (I have previously posted my rationale for this number). What is the NTA per your calcs after all writedowns??

Debt-Coversion of debt to equity is beneficial for BEPPA. As for increased interest charges, $4B of net (ie income less increased expense) additional expenses in the form of additional interest cost have to be incurred before BEPPA is affected one cent.

At a sky high rate increase of 400bps, that equates to $100B of debt for one year or $10B of debt for 10 years before the $4B of NTA is wiped out. After that 10 years BEPPA will be affected for the first time.

Dilution of equity holders, well I dont hold equity. But then I agree I will give up 40 cents of the $1 face value so I get paid 60 cents. Even then I am losing 40 cents in the $

As a final observation I think a previous poster summed it up nicely. I think you fail to understand that we do understand the risk profile of BEPPA and BBI and invest accordingly. In my case I have set aside funds to take advantage of short term price movements.

Cheers

Just a minor correction....

NTA= Net tangible assets.
DBCT lease is an intangible... yet, it would be fair to include that in any asset calculation (Y)...

 

[prawn_86]

Just a reminder to all posters in this thread. Please keep the posts on the topic of BBI, as opposed to who has bought or sold what. Individuals holdings should have very little affect on the postings or information about the stock, providing the are disclosed.

Thanks

Prawn

 

[banska bystrica]

Well said prawn_86.

I am still waiting for some solid evidence that BBI's assets have suffered impairment to the value of $4Bn which is the quantum required for BEPPA to be rendered worthless.

I ask select, drsmith and anyone else who thinks BBI is doomed to please submit which assets have suffered impairment since the Dec 31 accounts were released and please specify the quantum of impairment on each asset. That way, we can all see the alternate view and make up our own minds.

 

[banska bystrica]

Silence at this point in time from the doomsayers.

Ok, I'll give them a leg up. I'll slash $300M from PD Ports, $300M from Euroports, $400M from Alinta and $400M from Westnet Rail.
These are all "end of the world" valuations. There's potentially $1.4Bn in write-offs.

Now, NGPL, DBCT, PowerCo are all performing at or above expectations despite the GFC. It's hard to imagine a more bearish period so I cannot see any possible impairments from those. IEG is performing so lets slash a mere $100M off it.
The rest are small fry and not material.

So, what have we got? Potentially $1.5Bn in impairments. That still leaves BEPPA worth $1. Trading at 12c? I'm comfortable and if they get cheaper due to panic if Euroports doesn't settle, I'll step up for some more.

 

[fuzzie]

Analytics has nothing to do with it. It's all in the sentiment!

I still have BBP in my watch list and I scratch my head every day! There is a share that by my back of the envelope sums has no asset value left after debt.

And they continue to trade at a premium to BBI.

I guess at this penny dreadful end of the market sentiment rules. That's why going down a cent looks really bad and panic sets in but going up a cent doesn't have quite the same positive push.

 

[banska bystrica]

I still have BBP in my watch list and I scratch my head every day! There is a share that by my back of the envelope sums has no asset value left after debt.

And they continue to trade at a premium to BBI.

BBP market value: $60M
BBI market value: $175M

Market rates BBI a 3 times more valuable company than BBP at current prices.