BNB - Babcock & Brown

[reece55]

Thanks for your comment Reece.

Next concern: I hear that Babcock and Brown Power has something like $3.1b of debt that will need refinancing soon.

This article says that http://www.theaustralian.news.com.au/story/0,25197,23385762-5012439,00.html

"ANOTHER Babcock & Brown entity that will remain a focus of attention is Babcock & Brown Power, which is set to refinance a big wad of debt within the next few months.

While chief executive Paul Simshauser has told the market he has received underwriting offers for a $3.1 billion debt refinancing, the market will remain nervous until the deal is done."

Question (to REECE): does the fact that they have recieved underwriting offers mean the refinancing is a "sure thing"?


How likely is it that they won't be able to? If they can't, will it be a domino effect, ie the end of the whole Babcock empire?

Hi Mr T.
Those concerns have been out there in the market place for a while, hence why BBP has gone from the lofty heights of plus $3 to 1.50 ish at the bottom.

Attached is an article on the underwriting process Link

Obviously obtaining debt at the moment is a difficult process. For those who don't remember, BBP is basically a portfolio of electricity generation assets previously owned by AlintaAGL. These are very high quality power generation assets that traditionally attract small margins above BBSW. I say traditionally, because at the moment we are faced with anything but a normal debt market.

In summary, in answer to your question Mr T, I would think that they will be able to obtain the finance (BBP's assets have almost guaranteed cash flow, we aren't running out of the requirement for electricity and banks love making a margin on predictable cash flow assets) , but the crucial question is at what price? BBP is structured 1 part equity 3 part debt, so any changes would impact the ability to provide distributions. At the moment the vehicle yields about 17%, but that only requires a 2.5% change in interest rate to be bumped down to 7%.

I always thought that the Alinta transaction was going to cause BNB a few headaches, looks like it certainly has. Hopefully by April they will be able to alleviate fears out there in the market place.

Cheers

 

[Mr_T]

Thanks Reece. I can't thank you enough for your generosity you have shown time and knowledge wise on these forums.

One small question: In an article a month ago, it said concerning BNB:

"For although the old financial-engineering model - of fee-laden retail trusts - is finished, the wholesale model should take up the slack and deliver growth. This is the guts of the story. As with Macquarie, retail is ex-growth and the blue sky is now in packaging up infrastructure assets for global institutions. This is the wholesale model."

I'm glad to see BNB is not concentrating on fee laden retail trusts as much anymore. But I'm not exactly sure what is meant by wholesale trusts? And who are these "global instiutions" that the author is referring to?

 

[thierry]

up 15% today... and approaching the 15 dollar mark zone..

Lets see what it does in the next couple of days...

What would be more damaging to the BnB share price, an american recession or lack of credit?

 

[overule]

I think BNB is trying to look for an upward trend.
Looking good at the moment.
Hopefully it recovers.

 

[Sean K]

I think BNB is trying to look for an upward trend.
Looking good at the moment.
Hopefully it recovers.

Trying, but needs to make a higher low and high and beat those resistance levels. Potential bottom at 12 but still too early IMO.

 

[Mr_T]

A *good* day for BNB with a 17.7% gain, but lets not get overexcited. Bottom line is that shares that were seen as most vulnerable to the credit crunch in general had the best gains. For instance, Allco doubled in price today, whereas Macquarie, which is seen (rightly or wrongly) as less vulnerable than BNB had a 11.7% gain.

 

[reece55]

Thanks Reece. I can't thank you enough for your generosity you have shown time and knowledge wise on these forums.

One small question: In an article a month ago, it said concerning BNB:

"For although the old financial-engineering model - of fee-laden retail trusts - is finished, the wholesale model should take up the slack and deliver growth. This is the guts of the story. As with Macquarie, retail is ex-growth and the blue sky is now in packaging up infrastructure assets for global institutions. This is the wholesale model."

I'm glad to see BNB is not concentrating on fee laden retail trusts as much anymore. But I'm not exactly sure what is meant by wholesale trusts? And who are these "global instiutions" that the author is referring to?

No worries Mr. T, that's what this forum is about.... plenty of people on here have shown me the same input, so it seems only fair that I would reply with the same.......

Wholesale trust are where the investment vehicles are unlisted and owned by fund managers and global pooled funds. The theory around is that listed markets have the potential to be too volatile and due to the fact that many are special strategies that are hard to understand, that the funds are generally misunderstood and therefore become undervalued. Personally, I think that is a load of bullocks - if you think that the RMBS disaster was a problem, imagine if the investment banks were able to run riot in unlisted funds that our super was invested in. Just imagine MacBank - all of a sudden, their FUM would be investing in products issued by other firms that were buying into their infrastructure trusts - talk about an even BIGGER conflict of interest and no disclosure requirements. To me, the wholesale option is the worst scenario, where our investments will be worth, well, whatever Macquarie say they are worth. And if the investment manager is getting kickbacks (the wholesale fund), they will only be too happy to show a blind eye. But this is only my view, would be worth a chat on another thread.

BNB movement today - I am with Kennas, still requires more work but good to see it close at $15. I would like to see it go a bit further, then retest $15 and bounce back higher - this would generate a lower low and higher high and this stock can start to get some $$ back. It was also good to see it bounce more than MQG, which itself has had a good couple of days of late.

Cheers

 

[Mr_T]

Will cashed up middle east and Asian sovereign funds be buying these wholesale infrastructure assets?

 

[Mr_T]

And a related question - will the fact that BNB has a reputation as a firm that is dominated by Jewish people affect whether middle eastern sovereign funds will deal with them? Clearly it will have no affect on the Chinese/Asian funds.

 

[Mr_T]

Is this some kind of joke? BNB make an unannounced capital raising. Once companies do this, you know you can't trust them anymore.

Just last month Phil Green in the results announcement said this company would be considering funding some of its employee bonus share scheme with a share buyback. Now they're issuing shares??

How does he expect us to trust him after this?

Might be time for me to cop the 60K loss by selling at this price and buying something with a better future - like BHP.

 

[Aussiejeff]

Is this some kind of joke? BNB make an unannounced capital raising. Once companies do this, you know you can't trust them anymore.

Just last month Phil Green in the results announcement said this company would be considering funding some of its employee bonus share scheme with a share buyback. Now they're issuing shares??

How does he expect us to trust him after this?

Might be time for me to cop the 60K loss by selling at this price and buying something with a better future - like BHP.

Trust NO-ONE...

Believe me, I know how you may feel.

I trusted VRE (like a fool) and blew $60k to the wind within the space of a few days... at least you have a decision you can make...



AJ

 

[reece55]

Is this some kind of joke? BNB make an unannounced capital raising. Once companies do this, you know you can't trust them anymore.

Just last month Phil Green in the results announcement said this company would be considering funding some of its employee bonus share scheme with a share buyback. Now they're issuing shares??

How does he expect us to trust him after this?

Might be time for me to cop the 60K loss by selling at this price and buying something with a better future - like BHP.

Mr T...
I appreciate you may be frustrated, but I think it's fairly obvious that the capital raising was required to approve the new debt facility. Regardless of what Phil Green feels, the Company is at the mercy of it's financiers and if they set a specified debt to equity ratio, then BNB must comply. Bare in mind the facility has gone from 2.3 - 2.8, so a 20% increase in facility with a 5% increase in share capital. Provided that they invest it appropriately, it will provide them with the ability to grow. Put it to you this way, would you prefer to be able to sell your shares at 14.50, or a lot less because if they didn't get the new facility, that is what you would be faced with....

Personally, I view this as a positive for the group - yes, it dilutes profit a little bit (about 5% placed here under listing rule 7.1) but enables them to move forward. After all, it was the facility that has been spooking the market for quite a while....

As for BHP having a better future than BNB, I guess that depends on your outlook for Commods - personally I wouldn't be sticking my money all in that pie a the top of the cycle.....

Cheers

 

[Mr_T]

I guess what I am saying is - why didn't Phil bring up the possiblity of this happening at the results announcement last month? I'm sure he knew it was a material possibility at the time.

What happened to full and frank disclosure?

This and their $100m USA property revaluation raises all kinds of red flags - I think to myself, what else are they hiding there?

As for commodities being at the top of the cycle, yes it is possible. Though I have been to China many times for work. Let me tell you, things are growing there at a million miles an hour. New buildings going up everywhere all the time, its huge peasant population becoming city dwellers, people starting to be able to afford cars (so they can spend all day in their traffic jams instead of their efficient subway systems). And they're still in the early stage of their development.

 

[reece55]

I guess what I am saying is - why didn't Phil bring up the possiblity of this happening at the results announcement last month? I'm sure he knew it was a material possibility at the time.

Whilst I do think that is a fair question Mr T, Phil would be likely to hide under the incomplete and confidential section of the continuous disclosure rules (LR 3.1)...

What I would be frustrated with if I was a shareholder was that they didn't go into trading halt yesterday, which in my mind should have been done whilst they were finalizing the placement. Because the market was misinformed yesterday.....

Cheers

 

[Mr_T]

Mr T...
I appreciate you may be frustrated, but I think it's fairly obvious that the capital raising was required to approve the new debt facility. Regardless of what Phil Green feels, the Company is at the mercy of it's financiers and if they set a specified debt to equity ratio, then BNB must comply. Bare in mind the facility has gone from 2.3 - 2.8, so a 20% increase in facility with a 5% increase in share capital. Provided that they invest it appropriately, it will provide them with the ability to grow. Put it to you this way, would you prefer to be able to sell your shares at 14.50, or a lot less because if they didn't get the new facility, that is what you would be faced with....

Personally, I view this as a positive for the group - yes, it dilutes profit a little bit (about 5% placed here under listing rule 7.1) but enables them to move forward. After all, it was the facility that has been spooking the market for quite a while....

As for BHP having a better future than BNB, I guess that depends on your outlook for Commods - personally I wouldn't be sticking my money all in that pie a the top of the cycle.....

Cheers

Hi Reece, 2 points:
a) I listened to the market briefing on their Website. Phil emphasised that the banks did not require the capital raising. He actually claimed that the banks knew about it the same time everyone else did. He said he did it because the market feels more comfortable with a lower gearing ratio at the moment.

This in itself raises a milion and one questions.

b) The capital raising is bigger than it looks. Apart from the capital raised already, BNB wants to change the ratio of cash:shares in its bonus towards more shares and less cash. This is in itself an "in house" issue of capital, because it means more shares on issue and less cash.

 

[thierry]

Good day today.. let see what it does tomorrow.. still way off the 20 dollar mark...
anyone got any broker price targets on this stock.. (not that it means much these days)..

Also I would like to know the probability of this stock dropping below $10.00?

 

[VViCKiD]

BNB Dividends

Has anyone recieved their BNB dividends yet ? If so, which bank are you with? I have not received mine yet and I am with CBA

 

[Mr_T]

Yeah, I got my divs from my BNB shares which have now been sold. Just checked my account today.

So glad I sold my BNB at $14.50, took the loss and bought BHP at $35.50 a couple of weeks ago as I suggested in a previous post. I really think BHP is the wave of the future.

As for BNB, once the company starts spinning to the Nth degree, as BNB are, it's really time to abandon the sinking ship. Asset revluations for American real estate that go into a P & L (yeah, right), raising the possiblity of a share buy back at the annual results presentation and then conducting a a new share issue a month later, etc etc - How can we trust these people?

 

[mrgroundwork]

does that mean you will no longer be posting your hysteria in this thread? if you were that bitter about the way the company was run you should have bailed a long time ago...

 

[reece55]

does that mean you will no longer be posting your hysteria in this thread? if you were that bitter about the way the company was run you should have bailed a long time ago...

No need to be mean there Mr Groundwork.... Mr T was just venting his thoughts.......

However, Mr T the underlying point he (Mr Groundwork) makes is something to consider.... The old rule of only investing in Companies you can understand certainly applies here, the more you seemed to understand the Company (BNB), the more you were uncomfortable...


Technicals here are not looking at all healthy, I was hoping for some support to be found at the 14.50 - 15 level, but she fell straight through on Monday... Here's hoping $12 can hold........

Cheers