Several Hybrids paying divs are currently trading well below 40c in the dollar, even investment grade hybrids are at big disc to face value. An okay outcome on DBCT, Euroports and PD ports may still see BEPPA trading around 30c. That is still a great price from here, but debt instruments will not trade near their face value for a while yet.
That's it. BEPPA are on the Creditors side of the books, with SPARCS holders above them, then the senior debt above that (banks). BEPPA holders, while being at the bottom of the creditor ladder, whould have to be paid IN FULL (face value + any distributions owing) before vanilla BBI holders will see a cent.You got it. BEPPA was a *loan* to BBI. BEPPA holders ARE CREDITORS to BBI, standing in line unsecured at the bottom of the creditor pecking order.
The non-recourse lenders will have called in their loans. They will be due and payable, so the entire assets of BBI would be sold in liquidation.Let's go with your statement that the company is liquidated for benefit of creditors. So BBI goes into receivership. The receiver sells DBCT, PD Ports, and Euroports, which were going to sell anyway. From those proceeds, all corporate debt is repaid in receivership. Now what?
Chapter 11 is a completely American thing. There is no such option available in Australia.Is there a way in receivership that BBI management can show their ability to continue as a viable entity from that point on and simply exit receivership without any additional liquidations? In the U.S. we call such situations a Chapter 11 bankruptcy.
In one word, yes. They would do this to protect the capital they have lent.And the real question for me is in receivership would all of the non recourse lenders come out of the woods demanding liquidations of their assets?
Even with 20c paid (10c Distribution deferred + 10c of face value) in the event of liquidation, it's not a bad return on my average buy price of 8.4c.Let's start thinking about the end game and what BBI looks like in receivership, because BBI EPS might be a decent speculation even for that scenario.
No. Stocks are put into trading halt once they go into receivership, and IF they come through that without being liquidated, they can commence trading again.In Australia, are you allowed to trade on the stocks of companies that are in receivership? In the U.S., it is quite common to see a company declare a Chapter 11 bankruptcy and have the stock get a new symbol immediately, but continue to trade for weeks or months.
It could go into voluntary receivership, yes. I would expect that in most cases, the symbols would go into a trading halt.What I want to know is if BBI put itself into receivership, and the price of the BBI EPS shares started to crash, would we even get a chance to buy them? Or would the shares of both BBI and BBI EPS be immediately pulled from the market and no trading would be allowed?
The non-recourse lenders will have called in their loans. They will be due and payable, so the entire assets of BBI would be sold in liquidation.
Chapter 11 is a completely American thing. There is no such option available in Australia.
What will happen is that BBI would go into receivership, and then all financiers would call in their loans as due and payable in full. This includes SPARCS and BEPPA holders (in a round about way).
In one word, yes. They would do this to protect the capital they have lent.
I would want to protect the capital I have already loaned them, so I could get it back and loan it to someone else.Put yourself in the position of the non recourse lenders. Why would you prefer to have this asset sold rather than have BBI continue paying the loan?
The simple fact is that the lenders would call in the loans. I think you will find most loan documents will have a clause in then stating that if the borrower goes into receivership, then the loan is due and payable in full immediately.The Australian system cannot be this inflexible? Doesn't the company have any ability to work out settlements with lenders to emerge from receivership intact?
Put yourself in the position of the non recourse lenders. Why would you prefer to have this asset sold rather than have BBI continue paying the loan? You are in business to make loans, and you have a company that can make the loan payment.
The Australian system cannot be this inflexible? Doesn't the company have any ability to work out settlements with lenders to emerge from receivership intact?
This appears to be what has happened in the case of another of the Babcock and Brown satellites. B&B Power (BBP) has its finances in more of a twist than BBI. It breached debt covenants in May and went into a trading halt. After 'discussions' with it's bankers they have been granted an extended renegotiation period to the end of July and the stock is trading again.
Many of the BBI bankers are probably the same as BBP's bankers.
I would want to protect the capital I have already loaned them, so I could get it back and loan it to someone else.
The simple fact is that the lenders would call in the loans. I think you will find most loan documents will have a clause in then stating that if the borrower goes into receivership, then the loan is due and payable in full immediately.
Of course, settlements/offers can be made, however there would want to be a very good plan for going forward before that would happen. The main thing to remember is that there is no legal requirement to 'come to an arrangement'.
I am with you on most of this. I agree the loan provisions for non recourse loans will all say the loan is due immediately in event of receivership.
That's it. BEPPA are on the Creditors side of the books, with SPARCS holders above them, then the senior debt above that (banks). BEPPA holders, while being at the bottom of the creditor ladder, whould have to be paid IN FULL (face value + any distributions owing) before vanilla BBI holders will see a cent.
I thought that as SPARKS holders had voted no to BBI proposal that they have remained on an equal footing with BEPPA on creditor ladder.
I know we should plan for all contingencies, but isn't receivership only a remote possibility at this stage?
As far as I know, Euroports is the only immediate concern and wouldn't any failure there only involve Euroports itself, not BBI as a whole. Isn't it all non-recourse debt, although I'm not sure about the 35M Euro loan and the put option obligation.
Otherwise we seem to be able to meet debt obligations, but BBI holders (I'm BEPPA only) may have to worry about dilution when SPARCS comes up for conversion later this year.
They are actually ahead as it is the older debt and falls due before BEPPA.I thought that as SPARCS holders had voted no to BBI proposal that they have remained on an equal footing with BEPPA on creditor ladder.
Close, but not quite.The US and Australian systems are very different, the basic premise being Chapter 11 allows a company to trade out of difficulties, whilst the purpose of receivership is to liquidate assets to meet the claims of creditors. A company can continue operations, but only by agreement with the receiver.
Don't even bother. Just report the post. If enough of his posts get removed and continues on his stupid and petty name-calling, hopefully the mods will ban his account(s).My final observation is on the select/BB issue. Select, if you have something to constructive to contribute by all means post it. The next post I see of yours that is just petty sniping then I will just put you on ignore and would encourage others to consider similarly.
Close, but not quite.
Administration is bringing in outside management to go through the books to determine if the business is a going concern. It will determine Income & Assets versus Liabilities and debt, and try to trade out of the difficulties (similar to Chapter 11 but it has nothing to do with bankruptcy). A company can appoint administrators themselves, or a debtor can ask the Supreme Court to appoint an Administrator if the debt falls due and remains unpaid. The administrators will attempt to pay off all outstanding and out-of-terms debts, and is usually done by reaching agreement with debtors (payment plans, cashflow analysis & budgeting).
I know, I work in a business which has been using outside consultants in order to do alot of these things, plus formulate plans and budgets for the future. It's really the Administration you have when you are not under Administration. Hasn't been alot of fun.
Receivership is usually brought about senior debtors. The purpose of this is to try and sell off Inventory and possibly even parts of the business (divisions, particular sites, anything like that) to pay debt. There may be a point where parts of the business are sold and what is left is strong and healthy, where it can return to it's normal operation. Not often though.
Liquidation is where all assets are sold to pay off debts. This usually occurs when the liabilities far outweigh the assets of the business. The aim is to get as much payment for the debts as possible in a reasonable amount of time.
Hey persistentone, just had a thought on your point about the banks holding out on BBI in order to get their hands on quality assets cheaply and sell later for a handsome profit:
It isn't liquid enough.
Banks right now need cash and cash flow in order to lend. You are not going to be able to lend a Coal Terminal.
For things to get better, we need liquidity in the credit markets. What they will do by taking up assets like DBCT/PD Ports/Euroports/WestNet Rail is tie up large amounts of capital which will COST them money in the short term when their balance sheets will hurt he most from it.
In the current climate, I can't see any bank doing something like this without some serious backlash from shareholders.
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