Is this report true??? Trading recommence on Monday,see last para.
Bid for bigger payout endangers BBI futureINFRASTRUCTURE DANNY JOHN AND JAMIE FREED
October 10, 2009
THE $1.8 billion move to secure the future of Babcock & Brown Infrastructure faces a threat from its hybrid security holders who believe they might receive a greater payout if the group goes into liquidation than through their entitlements under the recapitalisation plan.
With BBI's board saying that the group could be placed into administration if the refinancing proposal is voted down, the Australian noteholders are considering whether a rejection could produce a 27c-a-security better return than currently proposed.
An initial investigation of the plan by investors has indicated that while BBI will pay the noteholders a total of 43c a security, the liquidation of the old Alinta energy assets, over which the noteholders would have access, could produce 70c a security.
The assets - which include interests in the Victorian energy distributor Multinet, WAGas Networks, the Dampier to Bunbury gas pipeline and the Tasmanian gas pipeline - were said by investors to be worth $2.6 billion.
BBI has $2.1 billion of debt tied to the assets, which would need to be extinguished by paying back the banks in full.
According to one unnamed institutional investor, once the assets were sold, that would leave $544 million of value in BBI EPS Limited, the group company through which the noteholders' interests are contained.
That is equivalent to a 70c-a-security payout compared to the 37c-a-security capital return plus an additional 6c interest payment, making a total of $333 million that BBI has suggested.
However, holders of the securities still have to work out whether BBI as a group would have any rights over such a sum through cross guarantees, or if a third party has some security once the banks are paid out but before the noteholders get entitlements.
There is also some doubt as to whether the value of the assets will hold up in the current market.
BBI paid $1.59 billion for the Australian Energy Distribution & Transmission assets as part of the complex Alinta takeover in 2007. In the recapitalisation prospectus it took a $680 million impairment on the assets, on top of $232 million of write-downs in August. It said the assets were worth less than the debt against them.
BBI's new cornerstone investor, Brookfield Asset Management, has been given an option to acquire the Alinta assets for $1 and will receive $5 million a year in fees in return for assuming management control of the assets under the recapitalisation deal.
If approved, that will give Brookfield - which could end up with as much as 40 per cent of BBI - control over a substantial amount of its assets. For a total investment of just over $1.2 billion, it will get 49.9 per cent of the giant Dalrymple Bay Coal Terminal and 100 per cent control of its British ports business, PD Ports, for effectively nothing.
Analysts said that by knocking back the deal, the noteholders and shareholders would risk losing what they had been guaranteed by BBI.
''This is likely to be as good as can be expected given BBI's admission that it would likely default under its [$300 million] debt maturities in early 2010,'' Deutsche Bank's Cameron McDonald said in a note to clients yesterday.
In the meantime, BBI said its shares - currently suspended at 5.3c - would resume trading on Monday.