BBI - Babcock & Brown Infrastructure

Given that BBI management/board were shown an alternative refinancing option that allowed them to roll over existing corporate level bank debt into a convertible bond(the RBS proposal), which would have allowed everyone junior (ie. hybrids and equity) to remain in place. And BBI mgmt/board refused this in favour of an absurdly value destructive re-floatation of the business(ie. Brookfield recap). i think all shareholders(including beppas) should reject the deal when given the chance to vote.

in fact , i don't know how they are going to get any beppa haircut agreed to when i believe it requires 75% vote to pass..

BBI is like the ugly daughter of Jeff Kendrew in a one night stand I woke up next to and was still snoring and on top of my left arm after my "Bucks night" party!

I have already cut my arm off without waking the slumbering giant and am getting on with life!

http://money.ninemsn.com.au/article.aspx?id=871200

banska bystrica said:

The price rise in BEPPA to 19.5c is a mystery and it is either arbs going long BEPPA and short BBI or it is insider trading (people who know what the deal is in detail).

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I would have thought a potential raising would be very positive for BEPPA, thus the recent run up. Any attempts to sell out BEPPA cheap would be hard fought imo

Jez said:

BBI is like the ugly daughter of Jeff Kendrew in a one night stand I woke up next to and was still snoring and on top of my left arm after my "Bucks night" party!

I have already cut my arm off without waking the slumbering giant and am getting on with life!

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Hope the current management have been saving their $$'s because i doubt they will have a job much longer. although i sense that is why the RBS proposal was rejected, because it proposed management changes. Brookfield will do the same thing though.

Current management should be banned from having another job where they are responsible for other peoples money. the value destruction of this recap is absurd . and all the worse considering there was a credible alternative.

you can tell the directors are scared, i see in the annual report that they took out extra directors insurance for criminal charges.

shareholders and beppas should reject the recap(there will have to be a vote) on principle(and for that matter on commercial grounds, they may still get more out of a wind-up of bbi)

Is there any chance that trading will open this week? I am afraid it will not long like REU. There is no hoping news in newspapers also. If any have please share it.

Albi said:

Is there any chance that trading will open this week? I am afraid it will not long like REU. There is no hoping news in newspapers also. If any have please share it.

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Updated this arvo.....might open trading 2moro!!!

Oct. 6 (Bloomberg) -- Babcock & Brown Infrastructure Group plans to raise A$1.75 billion ($1.5 billion) selling stock and some assets to repay debt, said a person familiar with the plan.

The owner of energy and transport assets in the U.S., the U.K. and Asia may announce details of the fundraising as early as Oct. 7, said the person, declining to be identified because the plans aren’t public. The company will sell A$850 million in stock, while an overseas investor will buy an equity stake and assets for an additional A$900 million, the person said.

Babcock Infrastructure, which cut ties with asset manager Babcock & Brown Ltd. in August, said last month it probably won’t be able to repay some of its A$9.1 billion of debt through asset sales alone. The company halted its shares from trading Sept. 30 after a 52 percent slump this year, and said two days later it was in talks about a recapitalization.

“You just don’t know what the company’s going to look like after this,” said Nathan Lead, an analyst at Wilson HTM Investment Group in Brisbane who has a “hold” rating on Babcock Infrastructure. “There is a place for this sort of fund -- I’m just not sure it’s in the listed markets. It’s too complex. Simplicity is what investors like.”

Sydney-based Babcock Infrastructure will sell A$600 million of shares to institutional investors in a private placement, and offer A$250 million of stock to all shareholders, the person said. Credit Suisse Group AG and Macquarie Group Ltd. are underwriting the offering, the person said.

Sale Process

Babcock & Brown Ltd. said in February that it would sell all its assets to repay debt, wiping out shareholders after its strategy of buying ports and property on credit imploded. At its peak, Babcock had a market value of $7.8 billion.

Brookfield Asset Management Inc., the Toronto-based company that runs the World Financial Center in New York, will invest A$600 million in return for a stake in Babcock Infrastructure, according to the Australian Financial Review, which reported the fundraising plans today.

David Akers, a spokesman for Babcock Infrastructure, declined to comment. Paula Hannaford, a Macquarie spokeswoman, didn’t immediately return a voicemail seeking comment, nor did Credit Suisse’s media office in Hong Kong. Spokespeople for Brookfield didn’t reply to voicemails left at their office.

Brookfield will also purchase 50 percent of the Dalrymple Bay Coal terminal from Babcock Infrastructure, and all of the PD Ports business in the U.K. for a combined A$300 million, the newspaper said.

Babcock Infrastructure said Sept. 30 that a revised refinancing proposal from Royal Bank of Scotland Plc received on Sept. 17 wasn’t superior to an offer from a so-called cornerstone investor.

To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net; Sarah McDonald in Sydney at smcdonald23@bloomberg.net.

Last Updated: October 6, 2009 03:26 EDT

Looks like it still hasn't opened yet...

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October 7, 2009
BABCOCK & BROWN Infrastructure plans to sell its ailing British port business for a nominal price of $1 to help reduce the debt burden that the group faces at both corporate and asset level.

Details of the token payment are contained in the documentation that has been prepared for BBI's $1.5 billion recapitalisation, in which the Canadian group Brookfield Asset Management will become its new cornerstone investor.

Brookfield is set to take over the ownership of PD Ports from BBI as part of a program of asset sales designed to reduce as much as $10.3 billion of debt spread across the Australian group's operations.

As part of the nominal fee Brookfield will assume responsibility for $205 million of borrowings held by the port operation, the third largest by volume in Britain and based on the north-east coast of England.

The debt is among the most pressing of BBI's liabilities. The PD Ports element needs either re-financing or repaying by the end of this month. An earlier deadline of July 31 was extended following agreement between BBI and its lenders.

BBI has previously admitted that the amount will be ''challenging to refinance'', the money having to be found from either operating cash flows, the proceeds from asset sales or through the raising of additional capital.

The first option was in effect ruled out by a significant fall in its operational earnings, caused by a drop-off in freight traffic resulting from the recession in Britain. BBI had been trying to sell part or all of the port that it acquired four years ago, without success.

The group has since written down some of its investment in the business. It was part of an overall $985 million impairment charge struck in its 2009 accounts.

It is understood BBI will take a further hit on PD Ports in an additional round of $900 million worth of write-downs once the recapitalisation is completed.

As well as acquiring PD Ports, Brookfield will also buy a significant stake in BBI's Dalrymple Bay coal exporting terminal for $300 million.

The Canadian group will also contribute about $600 million in new equity towards the total of $1.5 billion of funding that BBI is looking to raise in the short term. It is now placing the remaining new stock with a group of institutional investors.

However, an announcement to the stockmarket is now not expected to be made until tomorrow, given the amount of paperwork involved. Existing shareholders are likely to be asked to chip in $250 million through a share purchase plan.

The unveiling of the recapitalisation plan will coincide with BBI changing its name to Prime Infrastructure Group, cutting one of the last remaining ties with its former parent, Babcock & Brown

The Australian presented an article on Monday suggesting difficulties with the equity component.

http://www.theaustralian.news.com.au/business/story/0,28124,26165082-36418,00.html

Canadians eye infrastructure assetsINSIDER
October 8, 2009
Babcock and Brown Infrastructure hopes to unveil a long-awaited $1.75 billion recapitalisation deal as early as today after receiving sufficient backing for an institutional placement.

It seems some of the delays associated with the deal stemmed from the fact that Australian institutions were relatively unwilling to assist with the recapitalisation - their US counterparts were more open-minded.

In the end, Credit Suisse and Macquarie Capital have underwritten a $600 million or so institutional placement and $250 million share purchase plan.

Brookfield Asset Management will chip in at least $900 million to emerge as the new cornerstone investor with a 50 per cent stake in the Dalrymple Bay coal port in Queensland and all of PD Ports of Britain, although it may not have a majority of the company at a corporate level.

There are also suggestions Brookfield could receive a very cheap option covering the Australian Energy & Transmission Distribution portfolio BBI had gained through the ill-fated takeover of Alinta.

Initially, BBI had warned that the recapitalisation deal could lead to the conversion of all of its hybrid securities, which would leave little left for existing shareholders. However, there are suggestions a full conversion might be averted as part of the extremely complicated deal.

Brookfield is not the only large Canadian investor sniffing around Australian infrastructure assets.

Alberta Investment Management has told Canadian media it could announce one or two private equity deals - each worth about $C200 million - by the end of the year. One of the options is an infrastructure deal in Australia.

Canadian investors interested in Australia are looking beyond infrastructure. Commonwealth Bank this week issued $C300 million of so-called ''maple bonds'' in the Canadian market, which had been relatively dormant of late.

Toronto's Globe and Mail said the five-year notes carry a 3.625 per cent interest rate and the raising was upsized from an initial $C150 million target in light of strong demand.

BBI screwed, BEPPA laughing all the way to the bank! Expected 43c for beppa is quite generous and will prob be passed by the beppa holders.

skyQuake said:

BBI screwed, BEPPA laughing all the way to the bank! Expected 43c for beppa is quite generous and will prob be passed by the beppa holders.

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That was unexpected. 43c including payment of accrued dividends...so EPS holders get 5x the recent low. Damn those insiders.

Love the way "Existing security holders who don't participate in the insto placement or SPP will have no ongoing material interest in BBI". This recap plan might as well be a listed bankruptcy...

So most small retail guys will have to hope the SPP offer them something in return of complete wipe out on existing holding. The table showed existing holder will have 0.0% to 0.1% after recap... subjected to rounding error I suppose.

The BEPPA holders will vote yes and pop the champagne. I guess the instos BBI holders (are there any left?) will vote yes. But the small retail guy would only vote yes if he feels like doing some good towards the BEPPA holders out of his own misery.

If one held equal BBI to BEPPA they probably come away with minimal damage.

skc said:

That was unexpected. 43c including payment of accrued dividends...so EPS holders get 5x the recent low. Damn those insiders.

Love the way "Existing security holders who don't participate in the insto placement or SPP will have no ongoing material interest in BBI". This recap plan might as well be a listed bankruptcy...

So most small retail guys will have to hope the SPP offer them something in return of complete wipe out on existing holding. The table showed existing holder will have 0.0% to 0.1% after recap... subjected to rounding error I suppose.

The BEPPA holders will vote yes and pop the champagne. I guess the instos BBI holders (are there any left?) will vote yes. But the small retail guy would only vote yes if he feels like doing some good towards the BEPPA holders out of his own misery.

If one held equal BBI to BEPPA they probably come away with minimal damage.

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Well they'll get 4c per BBI which is better than nothing
Who knows, they might do well out of the SPP!
...I can only wish them GOOD LUCK and hope you've learnt your lesson.

All-in-all, that is the most fair recapitalization of a near-bankrupt company I have ever seen. Some things stand out for me as evidence that this agreement was more than fair:

1) The BBI are diluted to nothing (as I predicted they would be), but they were then generous enough to make a special one-time payment to shareholders of 4 cents to avoid the appearance of a total wipeout. They didn't need to do that, and the fact they did this shows good faith behavior that frankly is exceptionally rare in these kinds of situations.

And now we all understand why the BBI shares refused to fall under 5 cents. There was apparently massive insider trading on this very unusual deal point. No one could have reasonably predicted this one time payout. And mathematically you had to come to the conclusion that BBI would be completely wiped out, as in fact they were. The trading to hold BBI price artificially high had to come from someone trading on insider knowledge of the one time payout.

2) The BEPPA payout includes paying off back-interest. That's remarkable by itself and also shows very good faith in dealing with the BEPPA.

3) The BEPPA conversion was exceedingly generous.

4) BAM showed considerable generosity in not taking control of the company. It's ordinary in these kind of vulture deals for the acquirer to take 51%+, which would have greatly increased the dilution.

The fact that BAM doesn't take control also tends to indicate that BBI will not get stripped of assets.

I'm surprised at the outcome. It certainly isn't the deal I would expect based on experience with these situations, and it certainly isn't the deal described in the early afr article (maybe that article was a deliberate leak by someone to push shares down low?).

hmmm, i guess I was wrong, extremely fair deal, nothing at all like what I was expecting given management's track record and the precarious nature of their situation. I guess they had to do it or shareholders wouldn't have voted for the plan. Well done to those who held BEPPA, I don't think I would have been able to sleep that well if I had held.

I guess it also explains why BBI held up so well and why BEPPA nearly doubled even after the DBCT sale fell through.

suhm said:

hmmm, i guess I was wrong, extremely fair deal, nothing at all like what I was expecting given management's track record and the precarious nature of their situation. I guess they had to do it or shareholders wouldn't have voted for the plan. Well done to those who held BEPPA, I don't think I would have been able to sleep that well if I had held.

I guess it also explains why BBI held up so well and why BEPPA nearly doubled even after the DBCT sale fell through.

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I'm in the same position and agreed with this suhm,

Given that BB, HardYakka and Persistant One are the significant interpreters of BBI's complicated sturture, I don't suppose that they are around to interpret this strategy????

boronia said:

I'm in the same position and agreed with this suhm,

Given that BB, HardYakka and Persistant One are the significant interpreters of BBI's complicated sturture, I don't suppose that they are around to interpret this strategy????

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They're transforming it into a whole new company, the restructure is of such a large magnitude. All existing holders dumped and new holders are invited onboard.
Imo its quite positive for BBI as they are no longer living day by day with doom hanging over their heads.

persistentone said:

1) The BBI are diluted to nothing (as I predicted they would be), but they were then generous enough to make a special one-time payment to shareholders of 4 cents to avoid the appearance of a total wipeout. They didn't need to do that, and the fact they did this shows good faith behavior that frankly is exceptionally rare in these kinds of situations.
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they did it for the YES vote. diluted to nothing nobody would vote yes and they need the vote.

apart from the twist of div, you werent so far off the mark in the extent of dilution. but csi is much lower holder and beppa much higher.

Is anyone holding BBI? What are you going to do now? I am in heavy loss. Please advice me. Your advice will be much appreciated. My mind is not working.

I bought BBI at $1.265 - so i am looking at a very nice loss

At least I have learnt a few lessons and hopefully its tax deductible.

Albi said:

Is anyone holding BBI? What are you going to do now? I am in heavy loss. Please advice me. Your advice will be much appreciated. My mind is not working.

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JackJackJack said:

I bought BBI at $1.265 - so i am looking at a very nice loss

At least I have learnt a few lessons and hopefully its tax deductible.

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Albi and Jack, suggest you buy "Secrets for Profiting in Bull and Bear Markets" by Stan Weinstein and learn the basics of following price action in charts.Then you will be able to understand the principle of exiting a losing stock before your losses are as heavy as they apparently are.

Best not to feel too bad about it. I reckon most of us wore some losses in the early days. Just get $35 worth of education via above book and it won't happen again.