BBI - Babcock & Brown Infrastructure

nathanblack · 19 July 2009

mikes said:
who are /were the owners and directors & managers of B&B Europe Holdings Pty Ltd and B&B Europoean Infrastructure Fund and surely there would not have been any properly undisclosed association with B&B and associates or related party transactions which have not been approved by bbi holders.

BBI have sold assets or parts of assets previously in the same fashion. Some USA assets were offloaded to a private non-listed BBI Fund. Its all legit and above board. Its how BNB and many satelites have made money in the past. Buy assets, break them up, sell individual assets or stakes to an unlisted subsiduary and float the subsiduary or seek private equity.

All the while adding a premium to the price and collecting management fees.

But what would i know? I consider myself in quasi administration at the moment

banska bystrica · 19 July 2009

drsmith said:
With regard to the origin of the term Quasi-administraton, go back to the first post on page 80.

I stand by that 100%. When a forced bank sweep is in place, you are in quasi administration. It doesn't mean you are history. It doesn't mean investors cannot make a fortune out of it.

Now drsmith, myself and others are still waiting with baited breath for some concrete figures that back up your opinion. If you cannot provide figures, your opinion is not worth very much even though you are entitled to have one.
I suspect your knowledge of the BBI fundamentals are so lacking that you don't have figures to back your opinion up. Prove me wrong.

Viva_Las_Vegas · 19 July 2009

BB,

In your post you mentioned the following:

"I think an extension of BEPPA maturity past 2012 has got two chances of happening. Buckley's and none.
When I am talking restructure, I am talking in terms of a partial cash offer and some conversion of debt to equity. It is a winner for both BBI holders and BEPPA holders."

I appreciate what you are saying in terms of BBI holders winning by dilution being minimised, and BEPPA winning (well patrly) if there was a partial cash payout, subsidised with BBI shares.

My question is once PD ports is sold, then DBCT.... what does BBI have left? Westnet rail (which needs work), a % of ownership in NGPL..... essentially it is a company with little or no debt but missing many of the great assets that it once had as a result of the GFC.

So this is why I am wondering why I would want to accept part cash/part stock conversion for my BEPPA units in a restructure of BEPPA. If this ever happens.

In your opinion, and based on your research would you want to be the owner of shares in BBI post asset sales?

I understand that if I am wrong, and that if BBI can still perform then technically the BBI SP will have an infinite upside in price, as opposed to the finite upside of BEPPA at $1.20

Ofcourse all such proposals would have to pass in a vote. I personally would be happy to wait till 2012 for $1.20 or even roll over till 2015 with appropriate interest added on top.

nathanblack · 19 July 2009

Viva_Las_Vegas said:
Ofcourse all such proposals would have to pass in a vote. I personally would be happy to wait till 2012 for $1.20 or even roll over till 2015 with appropriate interest added on top.

You can always sell your BBI shares immediately or shortly there after to realise cash for them.

rolling over to say 2015 seems stupid to me. like you said not too many assets left after sales. will BBI still be around and healthy in 2015? whats the point of an increase dividend for beppa if its deffered?

its a safer bet to say BBI will survive til 2012 than 2015. i suspect it will be around for both, but obviously 2012 is more likely(less risk).

EDIT: Welcome back from your self imposed ban

banska bystrica · 20 July 2009

Viva_Las_Vegas said:
My question is once PD ports is sold, then DBCT.... what does BBI have left? Westnet rail (which needs work), a % of ownership in NGPL..... essentially it is a company with little or no debt but missing many of the great assets that it once had as a result of the GFC.

VLV,
The remaining assets (if DBCT and PD Ports are 100% sold) would be generating approximately $800M in EBITDA.
Now, tell me if you have a company that is debt free at the corporate level generating EBITDA of >$800M, don't you think that is a very good position to be in considering the mess we have witnessed over the last 12 months?

Powerco 81
IEG 96
CSC 22
Westnet Rail 75
Alinta 187
NGPL 240
Euro Ports 116

If that eventuates and they restructure BEPPA to avoid massive dilution in 2012, you will see BEPPA at a huge premium to the current price and BBI a decent multiple of the current 7c.

Viva_Las_Vegas · 20 July 2009

BB,

Thank you. I agree with you.

NATHANBLACK:
Nice to be back from the self-imposed ban!! The judge went easy on me this time!

Mitsimonsta · 20 July 2009

With talk of the restructuring of BEPPA...... would the currently outstanding distribution payments (somewhere around 5c now) be paid out prior to any restructure, or would they be a part of any restructure?

It is my position that any deferred distribution plus accumulated interest be paid to BEPPA holders prior to any restructuring proposal being made to BEPPA holders.

banska bystrica · 20 July 2009

What's the difference?

1. We'll pay the 5c owing and offer you 30c + 2 BBI securities or

2. We will not pay accumulated interest but offer BEPPA holders 35c + 2 BBI securities.

Does it really matter?

Mitsimonsta · 20 July 2009

Well, the only thing I am suggesting is that BEPPA holders might be more amenable to a restructuring if they are paid the deferred distribution before the terms are offered.

banska bystrica · 20 July 2009

Mitsimonsta said:
Well, the only thing I am suggesting is that BEPPA holders might be more amenable to a restructuring if they are paid the deferred distribution before the terms are offered.

Perhaps, but any deal will come down to what the Top 20 BEPPA holders agree to as they own 80% of the BEPPAs. I have three separate holdings but combined I think I am in the Top 20. I am sure BBI will canvass the Top 20 prior to making a final decision on what the new terms will be. This assumes they are indeed seriously thinking about a restructure. According to the Fin Review they are, so where there's smoke there's fire.

banska bystrica · 20 July 2009

Mitsimonsta said:
Personally, I would prefer not to hold any BBI post-BEPPA as I believe the value will be very, very low.

You may be correct but I beg to differ. I think a corporate debt free BBI with BEPPA restructured (and therefore huge dilution potential gone) will make an enormous difference to the BBI security price.
Say the restructure does involve issuing 2 BBI for every BEPPA plus some cash.
The BBI on issue after this would be approximately 4.2Bn securities.
Corporate debt nil, no further dilution and EBITDA of approximately $800M per annum. Interest expense on Corporate debt gone (saving approx $100M per annum in interest alone). Therefore, you then have the very realistic prospect of BBI distributions being reinstated. EBITDA of $800M and EPS of even 4c per share would put BBI at 32c (assuming a P/E of 8). Doesn't sound too shabby at all to me.
BEPPA a huge winner and BBI a huge winner for those who bought the stock over the past six months.

Mitsimonsta · 20 July 2009

banska bystrica said:
Perhaps, but any deal will come down to what the Top 20 BEPPA holders agree to as they own 80% of the BEPPAs.

Well, they need to be sure that whatever is proposed will pass. they do not want another SPARCS.

banska bystrica said:
I have three separate holdings but combined I think I am in the Top 20. I am sure BBI will canvass the Top 20 prior to making a final decision on what the new terms will be.

Undoubtedly. I think you would be the largest holder here by quite a margin now. There are a few decent holders of BEPPA around here.

Even at 30c per unit, I would have to think that your cash component of any restructuring would have to be well over 7 figures. I assume that the CG considerations would have to make an impact on your decision of wether to accept or reject any proposed restructure.

banska bystrica said:
This assumes they are indeed seriously thinking about a restructure. According to the Fin Review they are, so where there's smoke there's fire.

I have not seen anything about that but then again I do not read AFR every day. If you could nudge me towards that info then I would appreciate it.

--

I know you hold exponentially more Units than I do BB, but I am holding $31K worth of debt which I was able to purchase at over 90% discount.

Now 5c over 31K units is a reasonable amount of money to me - it could be much better in my pocket and invested somewhere else. I want to be buying into other stocks NOW while there is excellent value out there.

Consider: if the average entry price of most smaller BEPPA holders is 10c, and the 5c distribution is paid.
(We will forget the Top 20's for now)

1) half that initial average investment has come back. You could say that then BEPPA owes you 5c.

2) 30c is then offered as a restructure of BEPPA. This makes a 6x bagger on the average entry.

3) Any extra BBI is pure bonus - you would treat it like a stock that you have doubled up on and sold half. Just let it run as profit and owing you nothing.

Personally, I would prefer not to hold any BBI post-BEPPA as I believe the value and returns will be very, very low.

Please take into account that I purchased BEPPA as a Capital Gains vehicle to expand my portfolio. The profits were always going to be reinvested elsewhere. I am pretty sure that I have mentioned this before, both publicly and privately.

--

Sorry, moved the crux of my argument, however:

banska bystrica said:
BEPPA a huge winner and BBI a huge winner for those who bought the stock over the past six months.

BEPPA - I totally agree or I would never have bought it. BBI - Unsure of this just yet. If it does do what you mention (SP of ~32c) then I would more than likely sell at least half of them to fund other investments.

banska bystrica · 20 July 2009

Mitsimonsta said:
BEPPA - I totally agree or I would never have bought it. BBI - Unsure of this just yet. If it does do what you mention (SP of ~32c) then I would more than likely sell at least half of them to fund other investments.

I'm with you although I would probably exit the entire BEPPA/BBI portfolio if "best case" scenario eventuated. It is a long way from that right now. I entered this play as a massive risk/reward potential I had not seen for decades..... not because I am in love with BBI. The calculated risk has been taken and therefore, if the reward is realised, the mission is complete once the chips are cashed in. Lots of IF's still there. The play is a long way from coming off.

banska bystrica · 20 July 2009

Mitsimonsta said:
Undoubtedly. I think you would be the largest holder here by quite a margin now. There are a few decent holders of BEPPA around here.

What anyone holds is irrelevant. It's all relative. For all I know, your smaller holding might be a larger percentage of your entire net worth than mine is. I only commented about my holding in the context of possibly being canvassed prior to any restructure being decided.

banska bystrica · 20 July 2009

Let's all just see what happens with Euroports in two weeks. That has the potential to completely decimate the sentiment and in my opinion we would see the BBI and BEPPA prices smashed on any news that the Euroports deal is off.

Mitsimonsta · 20 July 2009

banska bystrica said:
I'm with you although I would probably exit the entire BEPPA/BBI portfolio if "best case" scenario eventuated. It is a long way from that right now. I entered this play as a massive risk/reward potential I had not seen for decades..... not because I am in love with BBI. The calculated risk has been taken and therefore, if the reward is realised, the mission is complete once the chips are cashed in. Lots of IF's still there. The play is a long way from coming off.

Exactly.

In my '10c average entry' example, it's worth getting out completely. There is no guarantee of a SP of 32c for BBI, and even IF it does get to that, it could be 2 years or more for it to happen.

I do note however, 30c cash + 2x BBI (at 32c) = $1.01 and much closer to the ballpark.

Trust me, if they pay out the distributions owed, and then throw up 35c + 2.5x BBI per BEPPA, then they MIGHT be onto a winner.

banska bystrica said:
What anyone holds is irrelevant. It's all relative. For all I know, your smaller holding might be a larger percentage of your entire net worth than mine is. I only commented about my holding in the context of possibly being canvassed prior to any restructure being decided.

No, it's nowhere near a greater percentage of my net worth than yours. BEPPA is ~27% of my portfolio value now. I doubt I will add to it now, I have other targets in mind.

I only mentioned it as you have basically put your money where your mouth is and put quite an amazing amount of money into BEPPA (and made all the right trades I hasten to add).

banska bystrica said:
Let's all just see what happens with Euroports in two weeks. That has the potential to completely decimate the sentiment and in my opinion we would see the BBI and BEPPA prices smashed on any news that the Euroports deal is off.

Agreed. If the two SP's do get smashed (and well below my Av. Buy of 8.4c) then I would consider topping up with some more. I'd like to have 50K units of BEPPA.

hardyakka · 20 July 2009

Mitsimonsta said:
Agreed. If the two SP's do get smashed (and well below my Av. Buy of 8.4c) then I would consider topping up with some more. I'd like to have 50K units of BEPPA.

If the BEPPA price gets savaged due to Euroports before the DBCT announcement then that will open a very brief buying opportunity.

nathanblack · 20 July 2009

hardyakka said:
If the BEPPA price gets savaged due to Euroports before the DBCT announcement then that will open a very brief buying opportunity.

I suspect if Euroports IS bad news, then BBI will time the DBCT announcement to be prior or at same time as Euroports to avoid that scenario.

I've got funds put aside just incase.

banska bystrica · 20 July 2009

nathanblack said:
I suspect if Euroports IS bad news, then BBI will time the DBCT announcement to be prior or at same time as Euroports to avoid that scenario.

Cannot happen as DBCT are not even at the second round of bids yet. Any offer for DBCT is probably at least 4-6 weeks away.

I suspect Euroports will not settle by July 31, there will be a bloodbath and we will have a window of opportunity to load up for more at very cheap prices. That's my opinion anyway. Looking for BBI around 2.5c/3c and BEPPA around 6/7c.

nathanblack · 20 July 2009

banska bystrica said:
Cannot happen as DBCT are not even at the second round of bids yet. Any offer for DBCT is probably at least 4-6 weeks away.

I suspect Euroports will not settle by July 31, there will be a bloodbath and we will have a window of opportunity to load up for more at very cheap prices. That's my opinion anyway. Looking for BBI around 2.5c/3c and BEPPA around 6/7c.

i hope your right, but im not confident enough to sell my holding now and re-enter IF it falls to those levels. With about $60k worth, the risk of miss timing the situation and selling now and then not getting a rebuy oportunity far outways my rewards for just holding.

BBI - Babcock & Brown Infrastructure

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