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I can't believe that in all these months we have all been discussing BEPPA that no one focused on the fact that it had asset level claims on Alinta. I'm frustrated with myself for missing that.
BBI - Babcock & Brown Infrastructure
- Thread starter roland
- Start date
I can't believe that in all these months we have all been discussing BEPPA that no one focused on the fact that it had asset level claims on Alinta. I'm frustrated with myself for missing that.
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To me the swap agreement reads as if BBI is paying 49.9% of the cash flow instead of interest for the $295m.
Exactly what 49.9% of the cash flows (other than certain excluded amounts) generated by DBCT is I could not find. If it's anything like the forecast EBITDA for half the business to June 2010 then it's a very expensive loan.
In conjunction with the option to convert that offers Brookfield all the upside of half the business from now but limits the downside to a maximum of $295m.
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I was always under the impression that BEPPA was structurally subordinated but looks like they have direct ownership of AET&D assets (see image)
The assets are:
• 74.1% interest in WA Gas Networks (formerly known as Alinta
Gas Networks);
• 100% ownership of Tasmania Gas Pipeline;
• 100% ownership of Alinta Asset Management – West;
• Up to 20% interest in Dampier to Bunbury Natural Gas Pipeline;
and
• 20.1% interest in Multinet Gas.
The question is though: what are these worth?
The assets are:
• 74.1% interest in WA Gas Networks (formerly known as Alinta
Gas Networks);
• 100% ownership of Tasmania Gas Pipeline;
• 100% ownership of Alinta Asset Management – West;
• Up to 20% interest in Dampier to Bunbury Natural Gas Pipeline;
and
• 20.1% interest in Multinet Gas.
The question is though: what are these worth?
Attachments
well according to the BBI EPS Ltd annual financial report BBI EPS Ltd has total assets of 2.591billion and total liabilities of 2.725bn of which (see note 19) 677million are the beppas. so assuming the beppas are the most junior obligation there is 543million of asset cover for the 778million face value of beppas or approx 70c in the dollar. this is how the media has reported that some think beppas should get 70c.
more importantly is if bbi eps ltd has the current liability problem ie. debts that need to be refinanced. i think it does not have the near term debt problems of the broader bbi ltd. ..
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BEPPA holders may vote this deal down....and so may BBI holders.
http://www.businessspectator.com.au...rastructure-BBI-pd20091013-WS7SU?OpenDocument
The 4c offer to BBI holders is nothing more than a bribe to get the vote through. They are holding a gun at BBI holders heads saying "Take the 4c now or you will get nothing in administration!"
Enough holders may just say we don't want your 4c. We would rather tip the company into administration and see all of management out of a job.
http://www.businessspectator.com.au...rastructure-BBI-pd20091013-WS7SU?OpenDocument
The 4c offer to BBI holders is nothing more than a bribe to get the vote through. They are holding a gun at BBI holders heads saying "Take the 4c now or you will get nothing in administration!"
Enough holders may just say we don't want your 4c. We would rather tip the company into administration and see all of management out of a job.
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The fine print tells us there is no upside in BBI after Brookfield gain control.
http://www.smh.com.au/business/a-stunning-jewel-in-babcocks-portfolio-20091012-gu0c.html
Brookfield have an option to purchase the remaining 50% of DBCT in latter years at a price specified by Brookfield.
Brookfield are virtually stealing this company and the assets will all end up in Brookfield's portfolio.
http://www.smh.com.au/business/a-stunning-jewel-in-babcocks-portfolio-20091012-gu0c.html
Brookfield have an option to purchase the remaining 50% of DBCT in latter years at a price specified by Brookfield.
Brookfield are virtually stealing this company and the assets will all end up in Brookfield's portfolio.
indeed. worse still is that under the proposal bbi is granting brookfield a free option over the AETD assets. Meanwhile BBI will attempt to account for these assets as 'held for sale' an accounting trick used to report a lower gearing ratio of 63%. If the accounting trick is not allowed they will be forced to consolidate the debt and report gearing of 73%.
in other words. brookfield get all the upside of the AETD assets , Prime will be left with all the downside and the gearing...
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That's pretty much as I predicted it would be isn't it? I always felt the Brookfield proposal would end up being a vulture investor looking to pick out assets.
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Long time lurker, first time poster after being booted off across the road.
The behaviour of the directors of this company defies belief....at their FY09 results, in August, they assured the market that they were actively seeking to sell DBCT and PD ports...infact, offers had been received for these assets.
Nothing could be further from the truth....they had been approached by Brookfield, one of the former bidders for pd ports months ago YET HAD NOT INFORMED THE MARKET that they had been approached.
They are now keeping their jobs, by the looks of things, after seeing the absolute destruction of BBI ords wealth....
Remember, they could have tried to have a cap raising early last year, to completely wipe out corporate debt, but they struggled along groaning under 9 billion of debt.
I sold out of BEPPA 2 weeks ago during spike to 19 cents...where the hell was the asx and asic...no speeding ticket???? questions to the company as to why it has risen so much (now we know)??? the whole bloody thing stinks
I would be prepared to pay for a class action against this company....to holders of ords, torpedo the proposal.....you get a measely 4c while BBI directors get to keep their jobs...
this whole thing stinks, BBI directors should be gripping the docks for this and getting sent to the big house for their dealings
The behaviour of the directors of this company defies belief....at their FY09 results, in August, they assured the market that they were actively seeking to sell DBCT and PD ports...infact, offers had been received for these assets.
Nothing could be further from the truth....they had been approached by Brookfield, one of the former bidders for pd ports months ago YET HAD NOT INFORMED THE MARKET that they had been approached.
They are now keeping their jobs, by the looks of things, after seeing the absolute destruction of BBI ords wealth....
Remember, they could have tried to have a cap raising early last year, to completely wipe out corporate debt, but they struggled along groaning under 9 billion of debt.
I sold out of BEPPA 2 weeks ago during spike to 19 cents...where the hell was the asx and asic...no speeding ticket???? questions to the company as to why it has risen so much (now we know)??? the whole bloody thing stinks
I would be prepared to pay for a class action against this company....to holders of ords, torpedo the proposal.....you get a measely 4c while BBI directors get to keep their jobs...
this whole thing stinks, BBI directors should be gripping the docks for this and getting sent to the big house for their dealings
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Further, i would be prepared to be part of a class action against the company and directors for failure to disclose market sensitive information and for providing misleading info to the market......if the directors think they are going to end up with their feet up at the expense of ords holders (or prev holders), they can think again...i am furious over this!!!!!!
interesting that the big buyers of beppas in last few days have been hedge funds. question is: are they just looking to make 6c from the deal going ahead or are these the hedge funds behind the RBS proposal and thefore looking to torpedo the deal as it currently stands so they can resurrect their RBS proposal or something similar...?
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Selling at 19 cents was actually pretty rational for anyone who didn't have insider information. You shouldn't feel too bad about that.
BEPPA could still unravel if the market starts to feel the proposal will be rejected in favor of Administration. Then you have to decide if you would want to hold it at 25 cents or under through an Administration, hoping to get 50 cents or higher from disposal of Alinta by an Administrator. For me as a US holder who invests through a US broker and doesn't have registration directly on CHESS, it's dicey.
If the buyers at auction for Alinta are going to be the likes of Brookfield, I guess we shouldn't hold our breath hoping for even 50% of book value.
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How do you detect the buyers are hedge funds?
And they won't make 6 cents under Brookfield deal. They would break even since SPARCs would convert and dilute the 43 cents to BEPPA. They would be investing to get something additional from administration, but that hardly seems like good risk and reward entering at the current price. Unlikely any hedge would approve of that math.
As you suggest, they might be trying to buy votes.
I still can't believe BEPPA opened at 41 cents. Does anyone do math?!
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BB correct me if I'm wrong but the article suggests Brookfield can ask for the sale of DBCT at the price they want and Prime would have to either buy them out in shares or cash or let the sale go ahead. But sale would have to go to a third party at 'no less than the price specified by Brookfield'. If seems to me unlikely that they would shoot themselves in the foot by setting a low price and so Prime would likely still get reasonable value for its interest. The loss of the DBCT wouldn't be too bad if it was at fair value.
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The Indendant Expert's report has a valuation of the AETD assets of between 48.4m to 148m which gives a recovery of BEPPA of between $0.06 and $0.20 which is a lot less than the $0.70 suggested unless i've missed something. The report does not mention then Alinta asset mangement asset but this may be included somewhere or not worth mentioning.
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I sold down my BEPPA from 19000 (bought at avg price of $0.08) to about 4500 at $0.13. I would probably have held all for the recap announcement had I more confidence in my valuation. If BEPPA could get between 6c and 20c from AETD and then any upside from the rest of BBI assets then buying around 10c or so would give a pretty decent margin of safety. Combine that with the fact any recap would require 75% of BEPPA holders to go along would mean any deal would have to be sweet enough to pass. Add that to possible RBS backup plan would mean downside was manageable and upside was pretty high. Talk about 20/20 hindsight!
Its history I know but i'm just trying to improve my decision making process. What do you guys think?
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http://www.theage.com.au/business/bbi-plan-could-be-as-good-as-it-gets-20091014-gxhw.html
As good as it gets they reckon. BBI never mentioned the extra level of holdco debt on the AETD assets in any previous presentations. Another example of non-disclosure.
As good as it gets they reckon. BBI never mentioned the extra level of holdco debt on the AETD assets in any previous presentations. Another example of non-disclosure.
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Can you post a link to the document that claims total liabilities of $2.73B?
I looked briefly, and I don't see how we could get much recovery in Administration here. First, for 2009 EBITDA across the Alinta, Tasmanian Gas, and Westnet Energy assets looks just under $100M. I have a spreadsheet from Banska that I enhanced that shows 2011 EBITA projected to $188M. Does anyone want to justify that number?
Even at $188M, if I apply a conservative 8 multiple to it, the business value is only around $1.5B. If the asset were floated as a separate company on the public market, you might get an 11 multiple which still only gets us to $2B.
In the spreadsheet I have from Banska the net debt is shown as $1.7B. I added up each individual loan from the annual report, and I came up with $1.2B. Add to this the hybrid debt and you are a little higher than $1.7B, but in the same ballpark. It looks like we are just missing key data here.
Here is the component debt for Alinta that I was able to get from annual report for BBI parent:
WA Gas Unsecured 175M Term Facilities 9/2011 145M
WA Gas Unsecured 20M Term Facility 9/2009 9.5M
AET&D 2 Secured $518M Term Facility 7/2011 518M
WA NW Subordinate 79.8M Debt 7/2018 79.8M
Alinta Guaranteed Notes Unsecured 446.7M Debt 9/2010 446.7M
Can someone do the approximate math to get us to $2.7B in liabilities?
Obviously if the actual liabilities are around $1.7B then recovery on Administration for BEPPA might be quite significant *if* you buy into the 2011 EBITDA of $188M. At $2.7B I think BEPPA has no hope of any recovery. At $1.7B in liability and with only $100M in EBITDA, again no chance of BEPPA getting any recovery.
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From this article:
"One especially nasty aspect of the structure is a particular thorn in the Australian Energy Transmission & Distribution (AET&D) business - on top of the $1.2 billion or so of asset-level debt in that division there is a layer of $518 million of holding company debt."
The $518M is the piece I was missing. Add that to my component asset level loans and you have just about $1.7B. The hybrid BEPPA debt is now on top of this, which gets us closer to the book value liability number.
The article also states that other corporate debt unrelated to Alinta could try to insert itself above BEPPA and make claims on the proceeds from the asset sale.
You have to be foolishly optimistic to see any real recovery for BEPPA here. You need a perfect storm:
1) We need to get a $2B valuation, using 2011 EBITDA numbers that look like dreaming. In reality, I won't be surprised to see someone bid EBITDA multiple of 5 against 2009 EBITDA of $100M for the entire thing.
2) You need to hope that the $300M ($2B - $1.7B) doesn't get any claims from corporate debt (yeah, right)
In theory Brookfield might sweeten the BEPPA offer - not because they have to but because there are powerful people who own them they need to buy off. Aside from that, unless RBS jumps in with a counterbid, I think this game is officially over. BBI is dead. The vultures have won.
Those who hung onto their BEPPA hoping for a miracle have been rewarded with one.
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FYI
Future Fund to invest $1.1bn in Brookfield vulture fund
The Future Fund has joined the growing list of sovereign wealth funds taking the plunge into the property sector, committing $US1 billion ($A1.1 billion) into Canadian institutional investor Brookfield Asset Management’s $US5 billion real estate vulture fund, reports The Australian newspaper.....
Future Fund to invest $1.1bn in Brookfield vulture fund
The Future Fund has joined the growing list of sovereign wealth funds taking the plunge into the property sector, committing $US1 billion ($A1.1 billion) into Canadian institutional investor Brookfield Asset Management’s $US5 billion real estate vulture fund, reports The Australian newspaper.....
