BBI - Babcock & Brown Infrastructure

Ross Walker · 14 February 2009

Tysonboss1 said:
At the reset date are you sure that it is the shareholders who decide which option they want to take, or is it the directors that decide for you.

According to "BBI EPS Limited: Terms of Exchangeable Preference Shares":

If you submit a valid Holder Exchange Notice, the Company may, at its discretion do the following in relation to the EPS which are the subject of your Holder Exchange Notice:
• Convert the EPS into Stapled Securities;
• Procure the acquisition of the EPS by a third party on 1 July 2012 and pay you the Redemption Amount; or
• Redeem, buy back or cancel the EPS on 1 July 2012 and pay you the Redemption Amount

So not as favourable as we had hoped. Then again, if we're paid in BBI stock we can sell them on market.

I'm still unsure whether the company, at its discretion, can choose to not pay the accrued dividends

nulla nulla · 14 February 2009

We live in hope that bbi will completely seperate from bnb and tell them where to put their "management fees (at this point bbi shareholders should be asking bnb to refund all fees due to mismanagement, imo).
Perhaps after the umbilical cord attaching bbi to bnb is removed from arround the neck of bbi, bbi can recover some of its' value for shareholders.

banska bystrica · 14 February 2009

Ross Walker said:
According to "BBI EPS Limited: Terms of Exchangeable Preference Shares":

If you submit a valid Holder Exchange Notice, the Company may, at its discretion do the following in relation to the EPS which are the subject of your Holder Exchange Notice:
• Convert the EPS into Stapled Securities;
• Procure the acquisition of the EPS by a third party on 1 July 2012 and pay you the Redemption Amount; or
• Redeem, buy back or cancel the EPS on 1 July 2012 and pay you the Redemption Amount

So not as favourable as we had hoped. Then again, if we're paid in BBI stock we can sell them on market.

Why do you say "not as favourable as we had hoped"? What were you hoping for? The BEPPA terms have been the same since BEPPA were issued.

We either receive $1 in cash plus accrued interest OR we receive $1 worth of BBI for each BEPPA.

hardyakka · 15 February 2009

Ross Walker said:
According to "BBI EPS Limited: Terms of Exchangeable Preference Shares":

If you submit a valid Holder Exchange Notice, the Company may, at its discretion do the following in relation to the EPS which are the subject of your Holder Exchange Notice:
• Convert the EPS into Stapled Securities;
• Procure the acquisition of the EPS by a third party on 1 July 2012 and pay you the Redemption Amount; or
• Redeem, buy back or cancel the EPS on 1 July 2012 and pay you the Redemption Amount

So not as favourable as we had hoped. Then again, if we're paid in BBI stock we can sell them on market.

I'm still unsure whether the company, at its discretion, can choose to not pay the accrued dividends

Hi,
Hi,
I had a look at BBI EPS Limited: Terms of Exchangeable Preference Shares
http://www.bbinfrastructure.com/media/387445/bbi eps terms.pdf

Refer clause 2.4 which deals with that part of a distribution deferred, it states:
"All Dividend Amounts which are deferred in accordance with clause 2.4(a) or otherwise not paid in full on the relevant Dividend Payment Date (until paid, Optionally Deferred Dividends) will accumulate and compound at the Dividend Rate on each Dividend Payment Date until paid."

It is worthwhile reading the document, especially the Reset Notice and Holder Exchange Notice clauses. In effect these are the clauses supporting some of BB's previous commentary.

Cheers

hardyakka · 15 February 2009

hardyakka said:
Hi,
Hi,
I had a look at BBI EPS Limited: Terms of Exchangeable Preference Shares
http://www.bbinfrastructure.com/media/387445/bbi eps terms.pdf

Refer clause 2.4 which deals with that part of a distribution deferred, it states:
"All Dividend Amounts which are deferred in accordance with clause 2.4(a) or otherwise not paid in full on the relevant Dividend Payment Date (until paid, Optionally Deferred Dividends) will accumulate and compound at the Dividend Rate on each Dividend Payment Date until paid."

It is worthwhile reading the document, especially the Reset Notice and Holder Exchange Notice clauses. In effect these are the clauses supporting some of BB's previous commentary.

Cheers

Apologies, the lkink was stuffed, it is:

http://www.bbinfrastructure.com/
media/387445/bbi%20eps%20terms.pdf

Ross Walker · 16 February 2009

banska bystrica said:
Why do you say "not as favourable as we had hoped"? What were you hoping for? The BEPPA terms have been the same since BEPPA were issued.

We either receive $1 in cash plus accrued interest OR we receive $1 worth of BBI for each BEPPA.

Banska bystrica, I thank you for the analysis of BBI you've provided in this thread, but I would suggest you check your pride at the door when responding to posts. You come across as somewhat arrogant and have a tendency to attack posters when a simply rational response would suffice.

In post #208 you mislead the readers of this thread by stating that BEPPA holders can choose to be paid out in BBI shares or in cash.

banska bystrica said:
BEPPA holders, on July 1 2012, can elect to:
1. Be paid out at $1 per BEPPA.
2. Receive $1's worth of BBI securities for each BEPPA held.
3. Agree to the new reset conditions and leave your money in BEPPA.

My post points out this is clearly not the case; it is " the Company" that chooses between options 1 or 2. BEPPA holders have no choice whatsoever in the form of the payout.

When Tysonboss1 legitimately questioned you on this very point in post #219 you simply chose to ignore him:

Tysonboss1 said:
At the reset date are you sure that it is the shareholders who decide which option they want to take, or is it the directors that decide for you.
...
This just seems far to good to be true, what is the real risk here.

I'm not sure about you, but I think most BEPPA holders would agree that having no choice in payout is "not as favourable" as having a choice. For most holders it may not be such a big difference (receiving BBI shares rather than cash). For others, having no choice may be a major disadvantage, i.e., the different tax treatments when receiving dividends (franking credits, etc.) as opposed to selling the equivalent BBI shares received in lieu of the dividends (capital gains tax trouble, etc.).

banska bystrica said:
The BEPPA terms have been the same since BEPPA were issued.

This is also incorrect. See the ASX announcement issued 21st November, 2008 as one example of terms that have changed since the issue of BEPPA:

http://www.bbinfrastructure.com.au/media/386197/amendments%20to%20constitution%20and%20bbi%20eps%20terms.pdf

BEPPA is a bit of a slippery fish, and fully understanding its terms and conditions (and the extent to which the directors etc. have provided the company with loopholes/outs among the countless clauses and subclauses) is no easy task. However, I do agree with you, BEPPA may represent incredible value if BBI survives past 2012.

Disclose: I hold both BBI and BEPPA.

Ross Walker · 16 February 2009

hardyakka said:
Hi,
Hi,
I had a look at BBI EPS Limited: Terms of Exchangeable Preference Shares
http://www.bbinfrastructure.com/media/387445/bbi eps terms.pdf

Refer clause 2.4 which deals with that part of a distribution deferred, it states:
"All Dividend Amounts which are deferred in accordance with clause 2.4(a) or otherwise not paid in full on the relevant Dividend Payment Date (until paid, Optionally Deferred Dividends) will accumulate and compound at the Dividend Rate on each Dividend Payment Date until paid."

It is worthwhile reading the document, especially the Reset Notice and Holder Exchange Notice clauses. In effect these are the clauses supporting some of BB's previous commentary.
Cheers

Yes hardyakka, it does pay to read both documents (constitution, and terms and conditions). In the constitution we find:

4.1 Dividends
(a) The directors may pay any interim and final dividends that, in their
judgment, the financial position of the company justifies.
(b) The directors may rescind a decision to pay a dividend if they decide,
before the payment date, that the company’s financial position no longer
justifies the payment.

Subclause (a) is as expected, but subclause (b) is most interesting, in that it suggests the directors can decide, at their discretion, not to pay out even the deferred dividends. Notice they did not explicitly use the words "interim and final" in this subclause, as they had in subclause (a), effectively increasing the scope of this clause to include the deferred dividends too. I guess I won't be counting my chickens until they hatch

Cheers.

banska bystrica · 16 February 2009

Ross Walker said:
(b) is most interesting, in that it suggests the directors can decide, at their discretion, not to pay out even the deferred dividends. Notice they did not explicitly use the words "interim and final" in this subclause, as they had in subclause (a), effectively increasing the scope of this clause to include the deferred dividends too. I guess I won't be counting my chickens until they hatch

Cheers.

You're like the rest of the market Ross. "Jumping at shadows" that are not there. Clause 4.1 (b) does not infer what you are saying at all.

You also wrote: "Banska bystrica, I thank you for the analysis of BBI you've provided in this thread, but I would suggest you check your pride at the door when responding to posts."

I merely asked you "What were you hoping for?"

Simple question and has nothing to do with what you accused me of re: attacking posters.

banska bystrica · 16 February 2009

There seems to be some concern over how BBI will payout BEPPA in 2012. I have previously mentioned various options and there is one other option that has not been mentioned.... BANK FINANCE! Ugly word I know but look what the banks did this morning with MCG.

"Broadcast Australia (BA) has successfully raised $250m of new bank facilities to refinance Medium Term Notes (MTN), due to mature in July 2009, and extended the majority of its capital expenditure and working capital facility to 2012.
MCG Chief Executive Officer (CEO) Scott Davies said, “BA has secured new senior bank finance with a term of three years to replace the maturing MTN. The facility has been provided by a combination of local and international banks and the margin is approximately 250bps."

Yes you heard it! Banks are refinancing where assets are quality and cash flows remain robust.
In 2012, BEPPA will not be a problem for BBI.

Tysonboss1 · 16 February 2009

banska bystrica said:
Yes you heard it! Banks are refinancing where assets are quality and cash flows remain robust.
In 2012, BEPPA will not be a problem for BBI.

Yes, the credit freeze is starting to thaw in the USA as well. as the smoke slowly clears from 2007/2008 credit will start flowing again. at the end of the day Banks won't make money from sitting on vaults of cash, they have to lend it make a profit, albeit a bit more cautiously now.

banska bystrica · 16 February 2009

If banks do not lend, they go broke. Simple as that. As you say Tysonboss1, they will be more cautious in future.
I have no doubt BBI will have very few problems re-financing their debt when it falls due. They have 75% regulated income against quality infrastructure assets.
The market either hasn't got a clue about this stock or there is just a complete lack of investor appetite for riskier stocks. The volumes are telling us that. Instos are shirt scared and want nothing to do with stocks like BBI (that's why your seeing BEPPA weak as well) and retail investors simply do not have the firepower to push stock prices up in bear markets. Those in BBI/BEPPA really need to take long term view. I'm not talking weeks or even months. I'm talking to at least 2010/11 and perhaps longer if you want to realize $1 for your BEPPAS. Traders can make a buck here and there but long term holders will reap the greatest rewards in BBI/BEPPA.

hardyakka · 16 February 2009

Ross Walker said:
Yes hardyakka, it does pay to read both documents (constitution, and terms and conditions). In the constitution we find:

Subclause (a) is as expected, but subclause (b) is most interesting, in that it suggests the directors can decide, at their discretion, not to pay out even the deferred dividends. Notice they did not explicitly use the words "interim and final" in this subclause, as they had in subclause (a), effectively increasing the scope of this clause to include the deferred dividends too. I guess I won't be counting my chickens until they hatch

Cheers.

Hi,
I want to clarify a few points, attached below are the relevant clauses from the BEPPA Constitution and Terms of Issue. We must be clear that the powers vested in the directors via the constitution are subject to the terms of issue.

In summary

The directors have the power to defer a dividend.
The directors do not have the power to cancel a dividend for a period (ie to resolve not to accumulate or pay a dividend for a period)
A dividend must be either paid (in part or whole) or accumulated. If it is paid in part only the unpaid portion is accumulated.
The dividend consideration can be cash or other consideration.

The relevant clauses with my underlining and comments in italics are noted below.

Constitution
Clause 2.2
(b) Each preference share confers on the holder a right to receive a preferential dividend, in priority to the payment of any dividend on the ordinary shares, at the rate and on the basis decided by the directors under the terms of issue.
(c) In addition to the preferential dividend and rights on winding up, each
preference share may participate with the ordinary shares in profits and
assets of the company, including on a winding up, if and to the extent the directors decide under the terms of issue.
(d) The preferential dividend may be cumulative only if and to the extent the directors decide under the terms of issue, and will otherwise be noncumulative.

The above clauses make the BEPPA Constitution subject to the Terms of Issue, ie the directors can only act in accordance with the powers vested in them in accordance with the Terms of Issue.
[/I]
Terms of Issue Clauses

2.1 My wording-This is the method of calculation of the "Dividend Amount", ie the $ payable.

2.3 Dividends discretionary
(a) Notwithstanding any other provisions of these Terms, the payment of each Dividend Amount is subject to the Directors in their sole discretion resolving to pay the Dividend Amount for the relevant Dividend Period.
(b) If the Directors resolve to pay only part of a Dividend Amount then such amount will be payable pro-rata across all of the EPS on issue on the relevant Record Date.

This means that the Directors can defer the "Dividend Amount", ie decide whether or not the company will effect a cash payment (in whole or in part) of the "Dividend Amount". Any amount deferred is sunject to the clauses below. (It is recognised that a dividend may be paid by way of cash or other consideration.)

2.4 Optional Deferral of dividends
(a) Subject to no Mandatory Deferral Event having occurred in relation to that Dividend Amount, the Company may defer payment in whole or part of a Dividend Amount in respect of a Dividend Period until the earlier of:
(1) the date in respect of which the Company declares or resolves that the relevant Dividend Amount is to be paid; or
(2) the tenth anniversary of the earliest Dividend Payment Date in respect of which there is any Optionally Deferred Dividend.
(b) All Dividend Amounts which are deferred in accordance with clause 2.4(a) or otherwise not paid in full on the relevant Dividend Payment Date (until paid, Optionally Deferred Dividends) will accumulate and compound at the Dividend Rate on each Dividend Payment Date until paid.

2.5 Mandatory Deferral of Dividends
(a) If a Mandatory Deferral Event exists on any day which is 25 Business Days prior to a Dividend Payment Date, the Company must defer payment of the Dividend Amount that relates to that Dividend Payment Date (until paid, Mandatory Deferred Dividend).
(b) All Mandatory Deferred Dividends will accumulate and compound at the Dividend Rate on each Dividend Payment Date until paid.
(c) The Company must exercise its discretion to declare or resolve to pay and to distribute a Mandatory Deferred Dividend as soon as the Company obtains funding to do so as a result of a payment to it under the BBI Support Agreement.

Clauses 2.4 and 2.5 deal with the deferral of dividends under different circumstances, as you can see both are cumulative.

My apologies if I am stating the obvious, it just seemed there was uncertainty regarding directors powers regarding deferral.

Cheers

Tysonboss1 · 16 February 2009

banska bystrica said:
The market either hasn't got a clue about this stock or there is just a complete lack of investor appetite for riskier stocks.

I probally would go as far as saying that even alot of the holders of beppa stock have little idea what it is and how it functions.

my father for example received some beppa along with BBI, BBP and BBW as part of the agl / alinta break up.

when I asked him if he knew what they were he didn't really know any details on them at all, I dare say there would be a fair few holders like my dad out there.

hardyakka · 17 February 2009

Slightly off topic

Hi,

For those who have had "experiences" at that other forum you may find this blog interesting and amusing.

http://hotcopperwatchdog.blogspot.com/

Cheers

eMark · 17 February 2009

Ahhh, my original place of posting. Good ol' Aussie Stocks Forum

-----------------------------------------------------------------

Seriously, I try not to watch intraday movements of BBP and BBI, as it is akin to watching grass grow at the moment (and there's not a lot of green stuff in my backyard at the moment I can tell you).

The SP appears (no is), completely controlled by bots (brokers I assume) from start to finish. If you use Web Iress you will know what I mean. Tiny amounts, strategically placed (prior to open, and after close). I mean today we have a high of 0.077 (just a nip with a tiny amount) and a low of 0.072 (lower low - surprise surprise).

Don't get me wrong, I am a huge supporter of BBI. I have been holding around the lows of November 2008.

As Melua, oops BB has said, no instos are going anywhere near this until confirmation of some much needed announcements. They can't come soon enough, as BBI is doing the nightshift at the moment.....zzzzzzzzzzzzz

Would love to be complaining about BBI doing nothing at 0.50, wouldn't that be nice!

p.s. Loved what I saw a sale can do to a stock like PPX.....

Very nice, so it is possible.

justiceotp · 17 February 2009

Hey Emark although it may be slightly off topic could you explain what you mean by the below in more detail.

"The SP appears (no is), completely controlled by bots (brokers I assume) from start to finish. If you use Web Iress you will know what I mean. Tiny amounts, strategically placed (prior to open, and after close). I mean today we have a high of 0.077 (just a nip with a tiny amount) and a low of 0.072 (lower low - surprise surprise)."

banska bystrica · 19 February 2009

I was able to buy another 400,000 BEPPA today at average 8.05c (not 8.5c but 8.05c). This is truly amazing value as it represents only a minimal premium over the ordinary securities (BBI). BEPPA is owed approximately 3c in deferred interest payments. If BBI is 7c, fair value for BEPPA is at least 12c (3c owed in payments plus some sort of premium for standing in front of BBI holders if administration were to occur.
Recent asset sales above book value indicate there is unlikely to be any asset impairment announced on Feb 25. Even if impairment was established, impairment alone cannot trigger a debt covenant breach. Debt covenants are based on cash flow rather than book values.

mark_au · 19 February 2009

Hi Guys

call me dim, but if BEPPA are preferential convertable notes,
are paid out prior to BBI (if things go bust)
are converted into real BBI shares at some stage
etc
etc

then why are they selling at very (0.079) similar prices rather than a premium to BBI shares at ( 0.072)

banska bystrica said:
I was able to buy another 400,000 BEPPA today at average 8.05c (not 8.5c but 8.05c). This is truly amazing value as it represents only a minimal premium over the ordinary securities (BBI). BEPPA is owed approximately 3c in deferred interest payments. If BBI is 7c, fair value for BEPPA is at least 12c (3c owed in payments plus some sort of premium for standing in front of BBI holders if administration were to occur.
Recent asset sales above book value indicate there is unlikely to be any asset impairment announced on Feb 25. Even if impairment was established, impairment alone cannot trigger a debt covenant breach. Debt covenants are based on cash flow rather than book values.

YELNATS · 24 February 2009

BBI is in a trading halt today until Thursday morning reason being some "issues" have developed with the sale of Powerco in NZ, a deal reportedly worth NZ$400 million.

If the deal is in jeopardy, is it significant enough to have any dampening effect on the sp? Is this an asset BBI is better off keeping anyway?

banska bystrica · 24 February 2009

Word out of NZ indicates the "issue" is about regulatory approval from the NZ authorities. We will obviously know more on Thursday. However, this news can only be negative. IF the NZ authorities are taking the opportunity to screw BBI/QIC on electricity pricing, then it could affect the value of the asset.
Sure, BBI would love to keep all their assets but we are in the middle of a global credit crunch and BBI has mountains of debt and some of it is due this coming month. They have to sell assets. There is no other choice right now. I might be able to top up at 2.5c again.

BBI - Babcock & Brown Infrastructure

Ross Walker

nulla nulla

Positive Expectancy

banska bystrica

hardyakka

hardyakka

Ross Walker

Ross Walker

banska bystrica

banska bystrica

Tysonboss1

banska bystrica

hardyakka

Tysonboss1

hardyakka

eMark

justiceotp

banska bystrica

mark_au

YELNATS

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banska bystrica

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