BBI - Babcock & Brown Infrastructure

joe7068 · 2 September 2009

I can't really see how the noteholders walk away unscathed through this. With BEEPA trading at 16 odd cents why would the proposal avoid looking at the noteholders while slicing the balls off the unit holders through dilution. I can't see it happening like that. The noteholders will have to give something back. I'm sure they could buy the note at 50 cents in the dollar anyway at worst.

No one is going to walk away from this unscathed.

Gunlom · 2 September 2009

Very true BEPPA holders, mostly likely will have to take a cut, but as alot of us have only bought in recently, It's no big drama.

As a 100% BEPPA, I could take a 50c cut and still skip away singing and dancing as happy as anything! ( average buying of 9.1c ) I think there alot of people out there like me!

If I get $1.20 per unit ( including distrubtions) by july 2012 , I'll be doing back flips up and down the street.

50c per unit is still more than enough.

ricee007 · 3 September 2009

joe7068 said:
I can't really see how the noteholders walk away unscathed through this. With BEEPA trading at 16 odd cents why would the proposal avoid looking at the noteholders while slicing the balls off the unit holders through dilution. I can't see it happening like that. The noteholders will have to give something back. I'm sure they could buy the note at 50 cents in the dollar anyway at worst.

No one is going to walk away from this unscathed.

Well, to BBI, BEPPA is cheaper than a bank loan...

BBI needs funds... BEPPA provides a low interest rate for this fund, and does not *NEED* to be paid out in cash (like a bank debt)... if a cornerstone investor only took a minor role (for example, bought $100M of freshly issued BBI shares for 10c, and a BEPPA-Like preference share for $200M, expiring 2015).. then in that csae, that would be $300M cash BBI would know have... and go a LONG way to paying back the soon to fall due corporate debt, and / or SPARCS... but wouldn't allow them to touch BEPPA....

We just don't know.

It's certainly not a forgone conclusion that BEPPA will be involved (though, it is likely)...

There is an *UNRELIABLE RUMOUR* that you should NOT rely on, that, someone is offering $1Bn in convertible preference share, and buying 49% of DBCT.... such a transaction wouldnt necessarily invoilve beppa....

Personally, i'd think about 50c is a bit too low.... but, want 66c, at least... (maybe, 66c cash..... though, honestly, i'd probably take 66c in bbi shares, then sell)...

I mean, it's worth $1.0435... not much need for me to sell it at 50c now... If the corner stone investor was significant (will take care of some coproate debt, sparcs THEN a couple of hundred million into BEPPA [clearly, the lowest priority])... then it is INSANELY likely that I would get $1.20 in 2012... sure, I want all the BEPPAs to convert / get cash at 50c..... but, I might as well wait 3 years and get $1.20... it just wouldn't make sense for me to convert at 50c...

cpsharky · 3 September 2009

Rice, stop dreaming too hard about that $1.20 in 2012.
You have to look at your investment from both sides. The reality is that the cornerstone investor will be after as much as he can get for his buck. I personally think that means Beppa will need to have its conversion rights lopped off. I think Beppa holders will be told to accept no more than 2 BBI for 1 Beppa in a conversion should it happen (possibly 1 for 1 actually) or there will be no investment. There will be no cash handout or even equity handout to Beppas. You will be asked to sit until 2012 at which time you will only see $1 if BBI are trading at 50c (or $1 if 1:1).

Would you accept that sort of deal? I would.

banska bystrica · 3 September 2009

I hold 3M BEPPA after selling 2M recently. I don't think this deal will be any great news for BBI holders or BEPPA holders. The cornerstone investor is holding all the aces. Without him, there is no back up plan. BBI are gone on Oct 30 without him. I think he has played his cards perfectly. He has waited until BBI are nearly dead and buried. On that basis, all the positives of any deal will be with him. That's the reality. He can ask for waht he wants and if he doesn't get it, he walks away and then what? BBI holders get zero and BEPPA holders wait 10 years for the liquidators final report and probably get zero anyway.

cpsharky · 3 September 2009

I wonder if this will fire possible DBCT buyers up? In the end the best result is to sell DBCT at a good price, and now it would appear BBI has at least something up its sleeve.

All very interesting.

Zarate · 3 September 2009

I have read a few times that DBCT is worth $1billion. What is the go with that? Or are they saying $1billion for 49% share?

banska bystrica · 3 September 2009

Zarate said:
I have read a few times that DBCT is worth $1billion. What is the go with that? Or are they saying $1billion for 49% share?

1 billion net after debt. Valued at roughly $2.8Bn and $1.8Bn owed to banks. Time will tell what happens.

Mitsimonsta · 3 September 2009

BB and just about everyone is awaiting the announcement. Would more than likely need to be today by 2pm or they are going to have to ask for a trading halt extension, more than likely to Monday morning.

Seems like someone is bullish on BEPPA, there is one buy order at 21c for 120K units. Next one down is 2 bids for 21.5K units @ 16c. I realise this really has no bearing at this time, just interesting.

boronia · 3 September 2009

banska bystrica said:
1 billion net after debt. Valued at roughly $2.8Bn and $1.8Bn owed to banks. Time will tell what happens.

Team, I have recently joined this site and found this thread. The passion and information are a great read. You have probably seen the following on BusSpec today but just in case you haven't...

Babcock & Brown Infrastructure

In addition to a capital raising announcement from Elders (delayed apparently because of this week's Bank Holiday in Britain), the market is expecting big news from Babcock & Brown Infrastructure today. Macquarie Capital, Credit Suisse and Gresham Partners are said to be advising BBI on a recapitalisation plan that will involve private equity giant Texas Pacific Group as a cornerstone investor. Well that’s the talk anyway. Private equity firms Kaplan Funds Management and Carlyle Group have also been speculated to be possible investors. A stake in BBI's Darylmple Bay coal terminal will also be sold as part of the deal, which will allow BBI to pay some of its $1.2 billion of debt, $500 million of which is due in six months. If BBI pulls this off it will be a coup for the debt-laden port operator.

Zarate · 3 September 2009

Mitsimonsta said:
BB and just about everyone is awaiting the announcement. Would more than likely need to be today by 2pm or they are going to have to ask for a trading halt extension, more than likely to Monday morning.

Seems like someone is bullish on BEPPA, there is one buy order at 21c for 120K units. Next one down is 2 bids for 21.5K units @ 16c. I realise this really has no bearing at this time, just interesting.

Just a thought on your pre-open analysis. Traders do sometimes put in bids when they want to sell something, and offers when they want to buy something - especially just before a market opens/re-opens. They do this to 'spoof' the market. I'm not neccesarily saying that this is the case here.

Thanks BB

Mitsimonsta · 3 September 2009

Zarate said:
Traders do sometimes put in bids when they want to sell something, and offers when they want to buy something - especially just before a market opens/re-opens. They do this to 'spoof' the market. I'm not neccesarily saying that this is the case here.

Hence my "I realise this has no bearing on anything" comment....

That said, I do have an order ready to send to market on my BEPPA.

ricee007 · 3 September 2009

cpsharky said:
Rice, stop dreaming too hard about that $1.20 in 2012.
You have to look at your investment from both sides. The reality is that the cornerstone investor will be after as much as he can get for his buck. I personally think that means Beppa will need to have its conversion rights lopped off.

I think it would be much more likely that the investor would offer money for BEPPA now... as in, if you don't sell then you keep conversion rights... if you do sell, you sell them for, say, 50c.

cpsharky said:
I think Beppa holders will be told to accept no more than 2 BBI for 1 Beppa in a conversion should it happen (possibly 1 for 1 actually)

I think thats just unrealistic, tbh. I wouldn't accept that.

Look at Net Assets, especially after a cornerstone investor. NA could be, say, 40c. SP could be, say, 30c in 2012... I am NOT limiting myself to that in 2012, even if it means voting against a cornerstone investor. I just wouldn't vote for it. WHich surely means that I either get my shares converted now, or I get to keep them to 2012... In 2012, if BBI can afford to give me $1.20, they do... otherwise, I'll take $1.20 worth of BBI shares... thanks.

cpsharky said:
Would you accept that sort of deal? I would.

No. I would accept cash, or BBI shares now.... I think I want around 66c... but, I won't limit my 2012 rights.

Mitsimonsta · 3 September 2009

The best way to go is that the Cornerstone Investor starts buying large tranches of BEPPA on-market after the deal is announced. They start paying up to what they believe is reasonable, you will see alot of sellers at 25c or more.

hardyakka · 3 September 2009

BBI and BEPPA have given us one hell of a ride. The worst of the GFC is over and we are now on the road to recovery, the smart money will move now to get in at the early stages of that recovery and I think that is exactly what is happening.

Any cornerstone investor would be crazy not to try and get a discount on BEPPA, by paying say 60 cents in the dollar they remove $1 of liabilities from the balance sheet, a gift of 40 cents, which I for one would not begrudge.

I hold just over 2M BEPPA and like any other person will look favourably on an equitable offer, but then at the same time I will not be taken for a ride.

It does not contribute to the thread by speculating on the possible content of the announcement, I am going to wait and see what is on the table.

Cheers

Tysonboss1 · 3 September 2009

joe7068 said:
I can't really see how the noteholders walk away unscathed through this. With BEEPA trading at 16 odd cents why would the proposal avoid looking at the noteholders while slicing the balls off the unit holders through dilution. I can't see it happening like that. The noteholders will have to give something back. I'm sure they could buy the note at 50 cents in the dollar anyway at worst.

No one is going to walk away from this unscathed.

I can't see anything happening to Beppa without shareholder approval.

So anything that does happen has to be good. Yes BBI has massive diloution risk however, Beppa is protected.

investorpaul · 3 September 2009

Mitsimonsta said:
The best way to go is that the Cornerstone Investor starts buying large tranches of BEPPA on-market after the deal is announced. They start paying up to what they believe is reasonable, you will see alot of sellers at 25c or more.

I think your pretty close to the market. Here is what I would do if I was the "Cornerstone Investor":

1. In the weeks leading up, buy a whole heap of BEPPA. On the last 3 days before the trading halt I would buy as many as possible. I.E. They wont be registered until T+3 meaning it would be after the trading halt date and the market would get wind of my plan via my significant holding statement early.

2. Provide BBI with $500m-$1bn cash injection inexchange for a large percentage of the comapny. Also buy 49% DBCT for $1.4bn with an option or revision depending on asset performance to increase this stake over time or in the event of BBI head company facing certain unforeseen economic events.

3. BBI is now diluted to bugger but I buy BEPPA on market up to say 25 to 30 cents. I then put a tender to all BEPPA holders were they elect how many shares they want to sell at what price (Fosters did something similar). Some BEPPA holders will say 40c others 30c some $1. The cornerstone investor then buys everything up to a value of 60 or 70cents (or whatever they chose).

4. 2012 comes around and lets just say BBI doesnt buy out BEPPA, they then convert for BBI shares and the cornerstone investor ends up with an even larger holding.

Mitsimonsta · 3 September 2009

investorpaul said:
I think your pretty close to the market. (snip)

Yeah, I have posted elsewhere but the gist was similar. Didn't think about buying in the 3 days leading up to the halt though.

There's been someone out these sniping all stray BEPPA below 15c, I have a feeling in my gut that it is the supposed 'Cornerstone'... I have learned over the last few years to trust my gut.

I see the following:

1) ~$500M cash injection by investor, and an undertaking to buy shares in an SPP to maintain ownership level.

2) SPP run for BBI holders, with BEPPA holders also invited to participate.

3) Enough cash to pay out the coming ~$500M of debt facilities ($205M Oct09, SPARCS & Feb10). Yes, I want to see SPARCS paid in cash.

4) With Corp. Debt out of the way and bank sweep removed, restart distributions to BEPPA. I'd then like to see BBI purchasing BEPPA on-market. 4.3c per BEPPA owed and soon to be 6c. My average buy price is 8.4c so it's a big slab of my original capital back that I can do other things with.

5) I suspect the Cornerstone would compete and buy BEPPA for ultimate conversion in 2012 to increase their holdings and probably ultimately full control of BBI with somewhere like 85% of the shares on issue. If this looks anything like happening, I am holding my BEPPA and waiting for about 60c or more.

joe7068 · 3 September 2009

BEEPA holders should sit tight and watch.

Re-equitizing BBI will only make 100 cents in the dollar look more achievable. Don't fall for any tricks from these guys. The real problem for BBI is at the equity level which is dragging down the rest of the tranches.

Do not accept anything less than 100 cents in the dollar and don't go for the crap they will spin that the notes are only trading at 15 cents. The fact is that is brought on by the weakness of the equity position not the debt.

Furthermore don't accept ANY haircut unless the senior debt holders are prepared to take a haircut as well. Just because senior debt doesn't trade like a security doesn't mean theirs is worth 100 cents in the dollar while ours is at a huge discount. That's just bull****.

If the deal doesn't look good to BEEPA holders then refuse it if its put to a vote and simply accept the assets are to be sold down.

Largesse · 3 September 2009

joe7068 said:
BEEPA holders should sit tight and watch.

Re-equitizing BBI will only make 100 cents in the dollar look more achievable. Don't fall for any tricks from these guys. The real problem for BBI is at the equity level which is dragging down the rest of the tranches.

Do not accept anything less than 100 cents in the dollar and don't go for the crap they will spin that the notes are only trading at 15 cents. The fact is that is brought on by the weakness of the equity position not the debt.

Furthermore don't accept ANY haircut unless the senior debt holders are prepared to take a haircut as well. Just because senior debt doesn't trade like a security doesn't mean theirs is worth 100 cents in the dollar while ours is at a huge discount. That's just bull****.

If the deal doesn't look good to BEEPA holders then refuse it if its put to a vote and simply accept the assets are to be sold down.

nah mate, that just called seniority of debt.

you may not like it but it's a fact of life and business

BBI - Babcock & Brown Infrastructure

Gunlom

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