BBI - Babcock & Brown Infrastructure

banska bystrica said:

Poor old "select" is assuming the 34% who submitted conversion forms will be voting NO.
I know one substantial SPARCS holder who sent in a conversion form but will be voting YES for the new terms. I'm certain there are many like him.

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BB,

What happened to your mate who was a "substantial SPARCS holder" who sent in a conversion form, didn't withdraw it and very likely voted NO to the new terms?

We had a good chat on pages 30 31 32 and 33 re our opposing views but I wont take the liberty of re hashing them at this stage.

But it's interesting that your views are now very similar to those that I expressed and I have been proved right.

Good luck

select said:

BB,

What happened to your mate who was a "substantial SPARCS holder" who sent in a conversion form, didn't withdraw it and very likely voted NO to the new terms?

We had a good chat on pages 30 31 32 and 33 re our opposing views but I wont take the liberty of re hashing them at this stage.

But it's interesting that your views are now very similar to those that I expressed and I have been proved right.

Good luck

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Select,

At the end of March the BBI price was about 5 or 6 cents. So the disaster that you predicted has given rise to roughly a 100% increase in price.

Hmmm.

select,
You were correct about the vote result. The result surprised me. There will now be approximately 260M new BBI securities issued and I would imagine a big percentage of those will sell asap. This will put further pressure on the BBI price.
Another lot of dilution will come in November with another 25.8M SPARCS to be converted.

My decision to be selling BBI over the past months and convert to BEPPA has paid off handsomely. My average sell price for BBI has been nearly 100% above my average buy price. I have been buying BEPPA at parity or within 1c of parity.
Like I said over the road on opening this morning, I dumped 1.5M BBI at 12c and the remainder of my holding at 11.5c. I am sitting on that cash now and will wait for the opportune time to load up with more BEPPA. I suspect I will be buying BEPPA below 10c next week. I might be wrong but that's what I think. The company has some hurdles to jump over the next few months, however, a sale of DBCT will solve all their short term problems.

select said:

BB,

What happened to your mate who was a "substantial SPARCS holder" who sent in a conversion form, didn't withdraw it and very likely voted NO to the new terms?

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I haven't spoken to him but I would imagine he is a very happy chappy right now. I'll let you know what he thinks after I speak to him tonight.

drop in sp further before close. sounds like 3-5 cents is not far away. maybe by middle of next week. what a great ride one week and a disastrous the other. I think BBI management should get their act together and sell of 100% DBCT now above 2.6 billion. By selling only 49% they are just holding to their pride. pd ports sale is gona be delayed for sure now. Why not sell NGPL.

max421 said:

drop in sp further before close. sounds like 3-5 cents is not far away. maybe by middle of next week. what a great ride one week and a disastrous the other. I think BBI management should get their act together and sell of 100% DBCT now above 2.6 billion. By selling only 49% they are just holding to their pride. pd ports sale is gona be delayed for sure now. Why not sell NGPL.

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If your going to quote price targets at a substantial reduction to todays close can you at least provide some supporting evidence.

Everyone here is aware of the difficulties BBI faces but to randomly pull figures out of the air and say it isnt too far away shows a lack or research and thought on your part.

If you can provide some serious discussion and points as to why it will hit that price target then thats great, I and everyone here would welcome discussion both positive and negative

investorpaul said:

If you can provide some serious discussion and points as to why it will hit that price target then thats great, I and everyone here would welcome discussion both positive and negative

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i think its safe to say that BBI(and probably BEPPA) has further to fall. I can see this becoming much more volatile in the next weeks. the reason is we will have increased volume(SPARCS dilution). i dont feel there will be too many big buyers out there whilst further dilution is possible and without updates on PD ports and euroports. only an DBCT asset sale or possitive outcome of PD/euro ports will bring buyers back in great numbers.

each negative news announcement only gives potential buyers more leverage in sale negotiations, so im not expecting huge premiums to book value, but im still hopeful.

if you look at the volumes and run up last week, followed by the volumes and sell off this week, with the SPARCS dilution there will be even more liquidity. i can see this becoming a daytraders stock, hence my view it will be manipulated and become quite volatile intra day.

nathanblack said:

i think its safe to say that BBI(and probably BEPPA) has further to fall. I can see this becoming much more volatile in the next weeks. the reason is we will have increased volume(SPARCS dilution). i dont feel there will be too many big buyers out there whilst further dilution is possible and without updates on PD ports and euroports. only an DBCT asset sale or possitive outcome of PD/euro ports will bring buyers back in great numbers.

each negative news announcement only gives potential buyers more leverage in sale negotiations, so im not expecting huge premiums to book value, but im still hopeful.

if you look at the volumes and run up last week, followed by the volumes and sell off this week, with the SPARCS dilution there will be even more liquidity. i can see this becoming a daytraders stock, hence my view it will be manipulated and become quite volatile intra day.

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Still holding BEPPA for the long term.

Trying to stay positive with my thoughts.

Can't realistically see DBCT not selling for a decent price. Certainly not for the 'knock your socks off' price some where hoping for. but 2.5 - 2.6 billion should be easily obtainable for an asset of such class.

That being said i still have trouble following along with the belief that in the event of a the DBCT sale falling through BEPPA holders will be left with nothing.

BBI is cashflow positive and covering all interest payments, debts have been refinanced recently and while the corus news is negative, i believe it will be resolved. Comparing BBI to BBP is like comparing apples and oranges, or maybe oranges and mandarins.

They will bleed BBI dry with high interest, but thats the poiint, it isn't in their best interests to call the debt when they can make more money basically extorting us with high interest.

I just don't see the banks calling the debt.

Very interested to here BB's (and others) thoughts % wise on the odds of survival.

Personally i still see it as 85%+ likely that BBI will be around for the next 10 years plus (albeit with the Babcock name removed)

Summation.

I hold in hope.

cbrendan said:

Still holding BEPPA for the long term.



They will bleed BBI dry with high interest, but thats the poiint, it isn't in their best interests to call the debt when they can make more money basically extorting us with high interest.

I just don't see the banks calling the debt.

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What we need to remember is that BBI is not in breach of its banking covenants yet and has proved to be cashflow positive through one of the most horrendous markets in a very long time. Yes they will try and bleed BBI, yet at the same time they will not kill the goose that lays the golden egg. Any losses come off there bottom line and affect tier 1 capital requirements.

What I have also noticed is a massive swing in sentiment from from positive to negative, and I fail to understand why. Consider the following:

a) The DBCT sale is still on track, nothing has changed.
b) The price after the spike is still trending up compoared to a month ago.
c) SPARCS dilution is 9%, or about 1 cent per security. How material is this if it cost 10cents and you would like to sell above 50 cents.
d) SPARCS is positive for BEPPA.
e) Corus is bad news yes, but the revenue stream loss will be offset by Tesco, with the added bonus of additional revenue if Corus generates some revenue.

The only real negative is Corus IMO. This board so far has acted in the best interests of unitholders, my only concern is that they do not try and hold on to part of DBCT. But then that depends on the price they get and I consider it will be close to the $3B mark. If they sell 49% of DBCT and are banking on a sale of Euroports before 30 June as well that would concern me.

I am in this for the longterm and hold a significant number of BEPPA only.



Cheers

hardyakka,
I feel that Euroports is the most important hurdle to jump. That deal must close by June 30 otherwise there are problems with the minority interests having exercised their put option and there is also the 35M Euro refund to Babcock and Brown European Infrastructure Fund.

banska bystrica said:

select,
You were correct about the vote result. The result surprised me. There will now be approximately 260M new BBI securities issued and I would imagine a big percentage of those will sell asap. This will put further pressure on the BBI price.
Another lot of dilution will come in November with another 25.8M SPARCS to be converted.

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Howdi BB, just a couple of questions...

How do we know 25.8M SPARCS will be converted in November? What will happen to the other 95M of them?

Cheers,
Rhys

hardyakka said:

What I have also noticed is a massive swing in sentiment from from positive to negative, and I fail to understand why. Consider the following:

a) The DBCT sale is still on track, nothing has changed.
b) The price after the spike is still trending up compoared to a month ago.
c) SPARCS dilution is 9%, or about 1 cent per security. How material is this if it cost 10cents and you would like to sell above 50 cents.
d) SPARCS is positive for BEPPA.
e) Corus is bad news yes, but the revenue stream loss will be offset by Tesco, with the added bonus of additional revenue if Corus generates some revenue.

The only real negative is Corus IMO.

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BBI became diluted by, according to you, 9% (I'll trust your numbers, i cant be bothered double checking).

25M/145M SPARCS were recently converted.

When will the other 120M SPARCSconvert?

1.9Bn BBI has became 2.15Bn BBI following the recent announcment.

120M SPARCS are left. At 10c, roughly 1.2Bn will be issued (give or take 25% for forex / approximations, etc).

So, up until a couple of days ago, 1.9Bn BBI on issue. Potential for another 1.45Bn, or an extra 75%+ BBI.

If NTA were $1/BBI share, now it could be more like 56.7cents.

Take away less if PD Ports needs to be impaired, and even more if assets have became impaired due to the GFC.

Now, imagine if 120,000,000 SPARCS convert when BBI is 5c.... 2.4Bn more BBI + the 250M that just became issued...

1.9Bn original BBI holders may turn out to be 4.55Bn BBI.

If NTA were $1/BBI share, NTA could become $0.41. Again, take away any impairment from PD Ports, any guarantee issues with EuroPorts, any asset impairments due to GFC, any hedging writeoffs any investment losses....

It's a much less rosy picture for BBI holders than as of a week ago.

Having said that, the retirement of $25M debt, and potential retirement of $120M more debt... is surely only a fantastic thing for BEPPA holders.

IMHO, due to irrational investors, BEPPA has gone.

Er, quick edit of the above

I forgot issued BBI were around 2.4Bn, not 1.9Bn.

Numbers will be out by about 0.5Bn for a lot of calculations (Y).

Sorry.

And,
IMHO, due to irrational investors, BEPPA has gone.
Should read:

IMHO, due to irrational investors, BEPPA has gone down.

ricee007 said:

Er, quick edit of the above

I forgot issued BBI were around 2.4Bn, not 1.9Bn.

Numbers will be out by about 0.5Bn for a lot of calculations (Y).

Sorry.

And,
IMHO, due to irrational investors, BEPPA has gone.
Should read:

IMHO, due to irrational investors, BEPPA has gone down.

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BEPPA has recently followed BBI closely, due to the fact that it relies solely on the survival of BBI. Most on here put a minimum premium on BEPPA of the retained interest, plus a slightly reduced risk.

This premium is generally represented on market at about 1.5cents, although recently its been parity quite often. Many have speculated the gap will widen as assets are sold and both SP rise.

How do you see the current dilution effecting the premium? and future dilution? Is it likely that BBI will fall further than BEPPA and a bigger gap develops?

ALSO my interpretation of the most recent announcement regarding SPARCS was that requests for conversion were approved and will take place next week AND all remaining SPARCS CAN convert at ANYTIME before September upon request???

Out of curiosity, what is SPARCS trading at in NZ? has it been punished ala BEPPA? Not a bad out, if they are trading at say 20c...get converted into $1 of BBI...then sold on market for say 90c.

ricee007 said:

BBI became diluted by, according to you, 9% (I'll trust your numbers, i cant be bothered double checking).


So, up until a couple of days ago, 1.9Bn BBI on issue. Potential for another 1.45Bn, or an extra 75%+ BBI.

If NTA were $1/BBI share, now it could be more like 56.7cents.

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Rice,

You are making the assumption that all SPARCS will be converted to BBI, the 9% number refers to the conversion resulting from last Fridays meeting of 25M odd SPARCS.

Lets assume all SPARCS were converted and for simplicities sake this means that rather than have 2.4B securities with an NTA of $1 there are 4.8B with an NTA of 50 cents. In theory the price of BBI would halve from its current 9.2 cents to about 4.6 cents. The same amount of money invested after conversion would buy double the number of securities with half the NTA, ie no change. But of course we know that the market will not do that.

As a BEPPA holder this does not concern me, I have always considered and said the BBI NTA in my view is a safety cushion for BEPPA holders. That being my simple risk aversion strategy for a high risk stock.

As regards the current situation, I consider there will be wholesale dumping of BBI with a resultant drop in the BBI price. This I view as being an acquisition opportunity, it is even possible that the price may touch some of its lows.

AS regards BEPPA, IMO that is becoming more and more tightly held as people start to recognise its inherent value and IMO there will be a widening of the gap between the BBI and BEPPA prices. Then again that is theory and supposed educated analysts cant get it right, so as per usual we may even see BEPPA prices drop in sympathy with BBI. Again an acquisition opportunity IMO.

The above of course is subject to one simple critical point which has been made countless times, and that is that assets are realised, ie 100% of DBCT.

There is IMO another point which is also very important. When we speak of NTA we talk about a $1 per BBI, ie $2.4B. Yet people forget that none of the BBI assets have been revalued as are assets held by property trusts.

DBCT from memory is held in the books at $1.9B, yet has a value of between $2.5 and $2.9B, lets be conservative and assume $2.6B. That alone adds $0.7B to NTA. Some assets such as PD Ports may be impaired (despite the fact Tesco and Corus revenues will largely offset), but overall I would not be in the least surprised if NTA would on a net basis increase by $1.5B (primarily DBCT and NGPL).

I have a pretty good idea how instos look at the infrastructure market, and it is never with a short term horizon. Fluctuations in equity capital and income caused by the GFC has pushed home the necessity for guaranteed long term returns, ie regulated income. That is why I consider we may be pleasantly surprised at the bidding for DBCT coming from a consortium of instos.

NB/ The above is a load of crap and brought about by my fantasising after having a bottle too many of a very cheap plonk so DYOR

Cheers

nathanblack said:

BEPPA has recently followed BBI closely, due to the fact that it relies solely on the survival of BBI. Most on here put a minimum premium on BEPPA of the retained interest, plus a slightly reduced risk.

How do you see the current dilution effecting the premium? and future dilution? Is it likely that BBI will fall further than BEPPA and a bigger gap develops?

ALSO my interpretation of the most recent announcement regarding SPARCS was that requests for conversion were approved and will take place next week AND all remaining SPARCS CAN convert at ANYTIME before September upon request???

Out of curiosity, what is SPARCS trading at in NZ? has it been punished ala BEPPA? Not a bad out, if they are trading at say 20c...get converted into $1 of BBI...then sold on market for say 90c.

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I asked about SPARCS trading price a few pages back, but no-one replied. the NZExchange website is terrible.

How do I see the current dilution affecting premium? The latest news was bad for BBI share price and fundamentally good for BEPPA price... an increasing premium should be expected... IMHO.

BEPPA shouldn't necessarily follow BBI. For example, if Babcock & Brown Infrastructure issued 5 Billion BBI shares at 5cents... it would be bad for BBI share price (TERRIBLE!), but BBI would have 250M more equity and cash to pay down debt...

Some news, like Corus should affect both SP in a similar fashion... but dilution is not one of those.

Similarly, IMHO, if DBCT gets 100% sold (or 49% at an awesome price), there would be little doubt of Babcock & Brown Infrastrucutre not being able to operate as a going concern (due to negligible corporate debt). As such, the market may think BEPPA will almost certainly be paid out June 2012. Ergo, the premium should increase, IMHO.

All SPARCS holder can choose to reset SPARCS or convert SPARCS, if I'm reading the ASX announcment correctly.

Having said that; Monday is the day when the converted SPARCS will be issued. Not sure if they will become tradeable then or not... but, BBI will quite possibly sink lower as people holding converted SPARCS try to sell BBI to recover most of their $1.

All in all, BBI might get a rough ride coming up... BEPPA may (imho) irrationally follow. To that end, I'm quite happy just holding BEPPA, with the view that I finish University in July 2012. I have no need to sell BEPPA prior to this. Coincidentally, June 30 2012 works out well for me.

I believe the company can operate as a going-concern, ergo, whilst short-term flucuations in BEPPA's price annoy me, and worry me just a touch... I'll hold long term.


EDIT:-Hardyakka,
I wasn't assuming... I was running with worst case numbers. I do know that conversion is optional for the SPARCS holder.

Having said that... if number of BBI issues double... the share price shouldn't halve That's important to note. BBI will have $145M less debt, for starters. If the SP halved, it would just be (IMHO) irrational.

Pages back I said NTA could very well be in the $3-$4Bn range. Whilst I don't want administrators called in... $1.0435 now would be quite nice...

Meh, I think I am over all this.

I bought in at (average) 8.36c.

If BBi gets liquidated, and BEPPA holders only get 20c/$ (plus outstanding interest payable) then as far as I am concerned, it's a good return.

Mitsimonsta said:

Meh, I think I am over all this.

I bought in at (average) 8.36c.

If BBi gets liquidated, and BEPPA holders only get 20c/$ (plus outstanding interest payable) then as far as I am concerned, it's a good return.

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Agreed, It gets tiring when your always jumping at shadows. I have placed my bet, Like my odds, I am just going to ride this out now.

Tysonboss1 said:

Agreed, It gets tiring when your always jumping at shadows. I have placed my bet, Like my odds, I am just going to ride this out now.

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Exactly.

That said, I have only invested about $2.6K cash into BEPPA, while that is a substantial portion of my portfolio, it's not so much money as to wipe me out completely if BBI goes under and takes everything with it. I do have other high-dividend stocks that I can use to my advantage.

This is in stark contrast to BB, who has a massive investment in BEPPA and it it basically only in BEPPA. A brave, well informed man is BB.

I personally can afford for BBI to go bust. BB has stated to me (I think via PM, apologies BB) that if BBI does implode, it will hurt him but "not have a material day-to-day impact on my life" or something along those lines.
Still, I'd be very upset if it did go under with that much invested.

That said, if the SP falls to ridiculously low levels (sub-8c) then I see it as a buying opportunity. I really did not want to get more after the SP spike in the last 2 weeks, but if the value is there again then you cannot discount it out of hand.

A good investor sees opportunity in the market, then seizes it. My investment plan is fluid, and if I mention doing something or looking to buy a certain stock, then it is in the context of the current market conditions. The markets change, then so does my strategy.

I was hoping for BBI to stay above 13c, below 12.5c is a speculative buy for me, and anything below 10.5c is a definite buy. I will wait and see where the SP leads me today.

Mitsimonsta said:

Meh, I think I am over all this.

I bought in at (average) 8.36c.

If BBi gets liquidated, and BEPPA holders only get 20c/$ (plus outstanding interest payable) then as far as I am concerned, it's a good return.

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good return? even if it takes the administrators 2years to give you your 20cents?

anyway, things will be fine soon enough. lets just sit back and wait for these sales to kick in.