BBI - Babcock & Brown Infrastructure

random · 13 July 2009

Its definitely only a short term view nathanblack.
Just until we get a little momentum going.
Many will want to jump on once we have some runs on the board. Until then we will just wallow.

As for now we are all thinking the same thing.
When are we going to hear an announcement about a sale of one or more assets?

We need some street cred to attract new punters and revitalize existing ones.
Shoudn't be too far away.
We just have to wait for now i guess.

random · 13 July 2009

skyQuake said:
And because of this will that keep the retail buyers, instos and funds away for some time...?

Cheers.

Time will heal all. And watching others benefit.

Also the fact that eventually (and this varies proportionally to the different egos and reservations of those involved) they will realize how much extra profit they missed out on before they jump back on.

nathanblack · 13 July 2009

Largesse said:
Whilst there are always temporary miss-pricings in the market, they don't last long.
agree

There is a reason why BBI and BEPPA continue to trade at these levels, and why, after the recent burst of excitement, continue to trade down.
im interested in your reason. do you think the current price is reflective of a view of liquidation? or dilution from an equity raising? or the stock will survive and remain same price with little capital growth or dividends?

For a second sit back and be truly objective about your investment.
Are you really smarter than all of those professionals out there?
i dont trust professionals much, they wrong as much as right, look at MIS like timbercorp, or LPT or storm financial, most just want a commission
Are you really seeing an opportunity where no else can?
i wouldnt say nobody else, after all there are buyer, volumes can be quite high, and this forum has more buyers than sellers. Or do you mean institutional buyers?
Or are you kidding yourself, and are taking a gamble on an asset sale in a declining market?
definately a gamble. but i think the "declining market" is where people decide to buy or sell. this involves your individual interpratation of economic figures, historical figures and gut feeling. if your of the view that the global economy and credit crisis is going to get worse or be prolonged then this is probably a bad investment. if your of the opinion that the credit freeze is ending and the economomy is or will recover sooner rather than later, surely this company will rebound and in excess of the general market.

Banksa will give you a list of reasons why to hold, but he had amazing market timing and perception to seize the opportunity at 3c and dump a large holding way up in the high teens. He made a killing, the bloke that bought his holding didn't.
agredd BB did well, but he didnt buy only at 3c and didnt see all at the high, he had good timing but not perfect. the bloke that bought in high teens may need to hold for sometime yet to recover his investment.
That movement wasn't a result of news events either, more massaging an interested market.
what do you mean "massaging". your right there was no news and the charts didnt indicate is was coming. i still cant understand it. i basically ignore it happened otherwise its easy to think the stock has fallen alot in last month, when in fact theres been a steady increase since december til now.

Does the current market for this stock still present you with the same opportunity?
same opportunity as BB? almost i guess. 3c then , 6c now. for me the opportunity isnt as good as it has been because the volatility is gone. do you see a reason for the lack of volatility give you think the stocks in trouble? why arent people selling at all cost?

And my concern relates simply to BBI/BEPPA. I think the security in BEPPA is being severely overstated.
i dont think BEPPA is much more secure than BBI. BEPPA only reflects $780mil so i cant see how beppa will get the full $1 and BBI nothing. the chances that that happens are slim. there will either be a shortfall for beppa or bbi will get something too.

FWIW, I couldn't care less whether this went up down sideways inside out or purple in the face. I made 2 trades on this, one that made me good money, one which handed back about a quarter of that money. I'm happy.
But I have seen this before, post-excitement blow off, and there are always people who get left holding a crying baby.

so you dont see the company surviving or you think it will just underperform? what is your main concern? asset sales not eventuating or poor prices? what if they refinanced all debt for longterm and kept all assets?

Largesse · 13 July 2009

All I am suggesting is that all you converted out there take some time to objectively think about whether BBI or BEPPA are a good investments, or just mug punts praying that DBCT offsets the losses BBI is going to take on some of their other assets.

Now, most of you will find this task near on impossible with out even realising it.This is because you are stock holders with vested interests.

While you have a go at really objectively looking at your holding, repeat this in your head:

"If there is so much value here, then why does the share price keep going down? Why is no one else seeing it?"

To quote Donald Rumsfeld (read: genius.... regardless of his political vagaries)

"There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know."

All i'm suggesting is to have a think about it.

nathanblack · 13 July 2009

random said:
Its definitely only a short term view nathanblack.
Just until we get a little momentum going.
Many will want to jump on once we have some runs on the board. Until then we will just wallow.

As for now we are all thinking the same thing.
When are we going to hear an announcement about a sale of one or more assets?

We need some street cred to attract new punters and revitalize existing ones.
Shoudn't be too far away.
We just have to wait for now i guess.

lol yup, everyone waiting on the DBCT announcement. i guess the full year report due in august could stimulate interest too. even a pd port/euroports announcement would be good, any negativity is already priced in to SP, so i think certainty good or bad will probable be a positive.

pitty no leaks to ramp up, but atleast theres no bad leak either. i just wish i knew what board was thinking regarding 49%-100% sale.

Largesse · 13 July 2009

Hi Nathan,

By nature, I am a skeptic. Some people look at that as a good characteristic, some bad.

Specifically,
I look at BBI as a lame bull. Could pack a punch, if it wasn't already mortally wounded.
FWIW, I see absolute bollocks value in the equity as it currently stands. The risk of severe dilution is massive and undeniable. BEPPA not much better. This whole mantra of "it's a hybrid that ranks ahead of BBI etc etc" is being overstated. There is still significant risk that BEPPA will not be able to be realised for face value, or even close to it, should assets sales not surprise to the UPSIDE.

Macro,
You can't deny this market is at tipping point either. Earnings do not just bounce back like what the talking heads on TV are suggesting. Also, to repeat myself, the risk of a severe LIQUIDITY EVENT in equity markets is massive and again, undeniable. But that is my personal view, and I am staying as far away from equities as possible over the next 6months.

There are lots of other questions in there, some of the answers obvious, some less obvious. You should do some research, for your own peace of mind, about that big spike a few months back. Ask why, and how, and possibly who.

nathanblack · 13 July 2009

Largesse said:
All I am suggesting is that all you converted out there take some time to objectively think about whether BBI or BEPPA are a good investments, or just mug punts praying that DBCT offsets the losses BBI is going to take on some of their other assets.

so you disagree with some of the valuations bandied around here. thats understandable and i respect your opinion and alternate view. do you think 6c is over priced still or correct price.

and in you mind what are the ramifications of DBCT not offsetting euroports/pd ports etc? i totally agree we will take a hit with pd ports and possible euroports, and you may be right that dbct wont cover that especially if oly a 49% sale.

but what will happen? equity raising? spin off of asset into seperate fund? renegotiation of debt? take over? bankrupt?

what your view on that? or as a non holder you havent looked that far in advance?

Largesse · 13 July 2009

I think it's near impossible to put a hard value on the equity in BBI at the moment.
Far too many unknowns, known or unknown.
Macro factors, asset prices, debt roll over, percentage of DBCT for sale etc.

With regard to the asset prices being bandied around, yes I definitely disagree with some of them (those ones should be easy to pick out).
I do concede that DBCT is a key strategic asset, and as such it will get some good bids.... how good i'm not as sure.
I'm more worried about Euro/PD et al.
These do not posses the same strategic significance, nor earning power, and are far more at the whim of the market. All have the potential to negatively impact on the free cash that the POTENTIAL DBCT sale produces, resulting in the offloading of a key asset, for no or a low net benefit.

To be honest, I haven't looked that far beyond the DBCT sale because, as you have shown, there are a myriad of options, all with different probabilities dependent on the terms of the sale.
If I was to proffer a guess, i'd say that BBI will continue to exist as a going concern into the future.... but whether the current equity holders will see any of the future value of the future entity is another questions.

nathanblack · 13 July 2009

Largesse said:
I think it's near impossible to put a hard value on the equity in BBI at the moment.
Far too many unknowns, known or unknown.
Macro factors, asset prices, debt roll over, percentage of DBCT for sale etc.

With regard to the asset prices being bandied around, yes I definitely disagree with some of them (those ones should be easy to pick out).
I do concede that DBCT is a key strategic asset, and as such it will get some good bids.... how good i'm not as sure.
I'm more worried about Euro/PD et al.
These do not posses the same strategic significance, nor earning power, and are far more at the whim of the market. All have the potential to negatively impact on the free cash that the POTENTIAL DBCT sale produces, resulting in the offloading of a key asset, for no or a low net benefit.

To be honest, I haven't looked that far beyond the DBCT sale because, as you have shown, there are a myriad of options, all with different probabilities dependent on the terms of the sale.
If I was to proffer a guess, i'd say that BBI will continue to exist as a going concern into the future.... but whether the current equity holders will see any of the future value of the future entity is another questions.

thanks for your time. its certainly food for thought.

Purely looking at announcements of substancial holdings, i put the spike down to a pump and dump by deutch bank. why the did it or more pricesly why they chose BBI/BEPPA im not sure. i could understand if it was pushed up before an equity raising, but this appears a simple pump and dump. may be wrong though.

my logic, again could be wrong, would be that NTA are about 90cent/share.but we are trading at 6c odd, meaning if dbct/euro/pd ports all sold for no or a low net benefit this would help lock in some of the 90c NTA. ie if after those sale NTA is still 90cent then surely the SP will rise somewhat. if they are sold for a net loss then this will be reflected in a lowering of NTA and possibly SP.

i guess your right there are still alot of unkowns, particularly around dbct. no professional would commit until thats all settled good or bad. they could save a fortune by sitting on sidelines or miss some gains.

thanks again.

mikes · 13 July 2009

if pd ports is a price regulated monopoly infrastructure asset, if volume of business halves, surely the price regulator will double the prices permitted to be charged for usage volume at the earliest opportunity, -- am i missing something

Viva_Las_Vegas · 13 July 2009

I regularly recieve a bulletin called bell & potter research.

Now I am going off memory here as I lost many of them due to hard drive failure, but I do remember BBI coming up a number of times as a buy recommendation between AUG and NOV 2008. This is what made them come up on my radar and cause me to buy/sell a few times. The buy recommendation was 13 c at the time

I am taking this "investment" as a gamble, and have not seen anything relating to BBI in the recent bulletins, but I ask all the learned posters here

"What has changed with BBI since AUG to NOV 08?"

All i have seen is....the market bottom, BBI appoint Mac to sell DBCT, Terra Firma refusing to deny rumours of its bids for PD/Euro ports, 250MIL a year saved due to nil distributions being paid, part of SPARCS converted, some NZ BBI bonds bought back cheap AND so far nil convenants breached.

Please feel free to add opinions, but in my humble opinion I see all these a positives in a difficult situation.

I hold BEPPA/ BBI

ricee007 · 14 July 2009

Viva_Las_Vegas said:
I regularly recieve a bulletin called bell & potter research.

Now I am going off memory here as I lost many of them due to hard drive failure, but I do remember BBI coming up a number of times as a buy recommendation between AUG and NOV 2008. This is what made them come up on my radar and cause me to buy/sell a few times. The buy recommendation was 13 c at the time

I am taking this "investment" as a gamble, and have not seen anything relating to BBI in the recent bulletins, but I ask all the learned posters here

"What has changed with BBI since AUG to NOV 08?"

All i have seen is....the market bottom, BBI appoint Mac to sell DBCT, Terra Firma refusing to deny rumours of its bids for PD/Euro ports, 250MIL a year saved due to nil distributions being paid, part of SPARCS converted, some NZ BBI bonds bought back cheap AND so far nil convenants breached.

Please feel free to add opinions, but in my humble opinion I see all these a positives in a difficult situation.

I hold BEPPA/ BBI

Bank Cash Sweep.
Possible PD Ports impairment.
Possible problems with EuroPorts.
Possible deathspiral if the cash sweep isn't removed.

Disc. Happily holding BEPPA.

persistentone · 14 July 2009

cpsharky said:
My understanding is that the broker has very little to do with the ownership of the stock. I can't see how a broker failure would affect you unless they were holding the stock on your behalf. But that isn't the case normally (and shouldn't be). Link Market Services on behalf of BBI will keep a record of your holding along with your identity details and your HIN. The ASX will have a record of your transactions, but I am unsure if they keep a record of your holdings (although they could work it out from your transactions).

It is easy in Australia to swap your holder sponsor (ie broker) around. I don't think the original broker can even have any say in it. If your broker goes belly up then you simply change broker. If Link Market Services went belly up then BBI changes share registry companies. If BBI goes belly up then the administrator will no doubt retain Link Market Services to keep a track of holders.

If you are borrowing to buy the shares and need to register them as security, then that is a whole new ball game.

BTW If you are after good research on BBI, I quite like the ABN AMRO research. They also have a broking arm.

Does anyone disagree with me?

Regarding ABN AMRO, can someone help me out here? I found two different ABN AMROs. One of these is here:

https://www.abnamromorgans.com.au

The other one is here:

http://www.group.abnamro.com/transition/transition.cfm

This latter group is now owned by Royal Bank of Scotland, which as most of you probably know is a complete basket case right now, just completely buried by all of its bad loans. It may be too big to fail, but I would not be comfortable with them.

Can someone reflect for me on:

1) Why are there two different ABN AMROs?

2) Which of the two is the one known for its research on Australian companies?

3) How stable is the first one, the ABN AMRO Morgans?

Tysonboss1 · 14 July 2009

ricee007 said:
Possible deathspiral if the cash sweep isn't removed.

Disc. Happily holding BEPPA.

Why do you think the cash sweep will cause a deathspiral.

100 characters.........................................

persistentone · 14 July 2009

Tysonboss1 said:
Why do you think the cash sweep will cause a deathspiral.

Because they lack the financial flexibility to deal with emergencies, like losing 25% of the cash flow at PD Ports which might put them in violation of a financial covenant on their corporate debt.

A lot depends on how mean spirited the bankers want to be in all of this.

fuzzie · 14 July 2009

persistentone said:
A lot depends on how mean spirited the bankers want to be in all of this.

I doubt there is a bank conspiracy to kill off the B&B satellites, they really don't want to kill any golden geese. BBP has been given breathing space on its bank commitments.

13 July 2009

BBP ANNOUNCES CHANGE TO ICR TEST
As advised in May1
, BBP’s financial performance for FY09 has been adversely impacted
by weak operating conditions. While management continues to expect normalised FY09
EBITDA to fall within the $260 - $270 million range previously advised, the BBPF Bank
Syndicate has agreed to lower the BBPF loan facility default ICR threshold for the June
quarter from 1.35x to 1.1x.

hardyakka · 14 July 2009

persistentone said:
Because they lack the financial flexibility to deal with emergencies, like losing 25% of the cash flow at PD Ports which might put them in violation of a financial covenant on their corporate debt.

A lot depends on how mean spirited the bankers want to be in all of this.

Lets just ignore the few pennies that tesco might contribute and comments from Helen regarding the PD Ports valuation.

I am not going to mention the dreaded death spiral...I have nightmares thinking about it...all those mean and nasty BEPPA holders ending up owning 100% of BBI....all because of the ..dare I say it..death spiral.

I love fancy words like that...how about BBI going into a "drut pord"..sorta has that fancy foreign sound...complicated cos no one knows what it means so it must be technical...and maybe that even implies I have a clue what I am going on about.

Try reversing the letters..isnt that the same as the DEATH SPIRAL.

Cheers

persistentone · 14 July 2009

hardyakka said:
Lets just ignore the few pennies that tesco might contribute and comments from Helen regarding the PD Ports valuation.

I am not going to mention the dreaded death spiral...I have nightmares thinking about it...all those mean and nasty BEPPA holders ending up owning 100% of BBI....all because of the ..dare I say it..death spiral.

I love fancy words like that...how about BBI going into a "drut pord"..sorta has that fancy foreign sound...complicated cos no one knows what it means so it must be technical...and maybe that even implies I have a clue what I am going on about.

Try reversing the letters..isnt that the same as the DEATH SPIRAL.

Cheers

That does raise an interesting question. In Australian law under Administration, would the Administrator sell assets until all creditors are satisfied, or would the Administrator be able to take all unsecured creditors and just convert them to common shares, and wipe out all BBI holders in the process?

Assuming secured asset lenders want to just keep their loans in place, would the Administrator have any ability to convert unsecured creditors to equity?

hardyakka · 14 July 2009

persistentone said:
That does raise an interesting question. In Australian law under Administration, would the Administrator sell assets until all creditors are satisfied, or would the Administrator be able to take all unsecured creditors and just convert them to common shares, and wipe out all BBI holders in the process?

Assuming secured asset lenders want to just keep their loans in place, would the Administrator have any ability to convert unsecured creditors to equity?

There is a heck of a lot of focus on administration...I put the chances of it at less than 20%.

The ASX listing Rules do not provide specific guidance on what is "significant", however the rule of thumb is anything that has a 5% impact on revenue or capital. PD Ports drop in value has not been disclosed under Rule 3.1, so from this I assume any impact is less than the benchmark mentioned. This was reaffirmed by the chat I had with Helen a few weeks back.

If any person is really worried about administration as a major risk they should get out of the kitchen

Cheers

random · 14 July 2009

Amen.................. I'm with you hardyakka.

Enough about administration.
We know there is a risk of it but have chosen this path.
So be it.

BBI - Babcock & Brown Infrastructure

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