BBI - Babcock & Brown Infrastructure

hardyakka · 29 June 2009

persistentone said:
First, I have not purchased BBI EPS yet; but I am very seriously considering it. Second, my target buy price would be around six cents. I wouldn't touch BBI if you paid me. But the income securities are interesting only because they might get a good recovery in receivership.

Persistence,

Interesting commentary, I suggest that you read through some of the earlier posts and that will give you a cross- section of views on BBI & BEPPA. For risk management reasons over the last 4 or 5 months I have always been a BEPPA only holder.

If BEPPA did drop to 6 cents (and I am not saying it will not) then you will find yourself with some reasonable buying competition, especially considering the minimal volumes of late.

Good luck anyway and if you want to look at some hybrids have a look at this schedule, it is updated daily and is self explanatory.

http://www.macquarie.com.au/macsecmc/codi/CodiServlet?nav=start&documenttosend=income_security_doc

Cheers

random · 29 June 2009

persistentone,

Just to be clear - you state that that you would not touch BBI but only BEPPA.
But if you only buy BEEPA and BBI does offer a dividend you will not be entitled to any of that dividend, you do realise that?

Can you please tell me what fees you are referring to that BBI charges its shareholders and that they are working for themselves. I don't get where you are coming from here.

Cheers

cpsharky · 29 June 2009

"But if you only buy BEPPA and BBI does offer a dividend you will not be entitled to any of that dividend, you do realise that?"

Random, don't forget that BBI distribution can not be resumed until BEPPA arrears have been paid. All future BEPPA distributions, as they are declared must also be paid before BBI distributions. I would go futher to say that BBI distributions aren't likely to resume while there is the threat of dilution by BEPPA. Persistence is right to avoid BBI while exposure to the BBI story can be had about 100 times more safely through BEPPA.

With regards to how the receivership situation works, I am no expert, but from what I gather the receivers wont be acting in the interests of BEPPA holders. Still, I agree there is a reasonable chance that BEPPA will see a return, albeit a long time down the track, in that situation.

I hold a bucket load of BEPPA and no BBI.

nathanblack · 29 June 2009

cpsharky said:
I hold a bucket load of BEPPA and no BBI.

would you consider increasing to 2 or 3 bucket loads anytime soon?

i suspect with phase2/3 upgrade of DBCT due for completion by end June, an announcement with be forthcoming pretty soon. Just having that monkey off the back may stimulate some action in SP. Also i suspect its what bidders are waiting for before finalising there offers.

persistentone · 29 June 2009

random said:
persistentone,

Just to be clear - you state that that you would not touch BBI but only BEPPA.
But if you only buy BEEPA and BBI does offer a dividend you will not be entitled to any of that dividend, you do realise that?

Can you please tell me what fees you are referring to that BBI charges its shareholders and that they are working for themselves. I don't get where you are coming from here.

Cheers

As I understand it, BBI EPS is higher on the credit hierarchy than BBI common shares. So BBI cannot pay a single cent to its shareholders until *all* dividends which are accruing to BBI EPS have been paid in full.

The bigger point to make here is run through the exercise of what happens when BBI eats it. The hierarchy of claims is:

1) Debt holders, and God knows there plenty of those for this one.

2) BBI EPS

3) BBI common

BBI only sees something in receivership if BBI EPS is paid in full. My guess is that they pay the debt holders in full, and the only worthwhile discussion is what is the size of the remaining scraps that get fed to BBI EPS holders. And I seriously doubt that BBI EPS holders would get paid in full. BBI holders are at serious risk of losing it all.

Someone correct me on that; I'm surmising what I can from various sources.

As one example of horrendous fees: Babcock and Brown extracted from BBI a $40M fee for doing the Natural Gas Pipeline deal.

cpsharky · 29 June 2009

Persistence,

The fees have stopped now. Look at the announcement regarding corporate governance (late last year I think). BBI are looking at terminating the management agreement which I believe they can do at a shareholder meeting, so no need to buy out the agreement.

No doubt about it, BBI was created to make money for BNB, at the expense of ordinary equity holders. The result is a a company with a big debt problem and a smashed share price.

The question is has the market over-reacted?

I believe so, and considerably in the case of BEPPA.

Time will be the judge.

nathanblack · 29 June 2009

deutch bank ceasing to be a substancial holder. volumes have been so low later hard to see how anyone is accumulating or selling down large amounts.

fuzzie · 29 June 2009

I haven't added up the numbers, but it looks like the last transaction for DB London is the significant transaction. Perhaps this is the termination of DB as the broker for a hedge fund? It will be interesting to see if there is a corresponding pickup for a new broker.

In the meantime, will there be an update about DBCT sale process tomorrow?

Tysonboss1 · 29 June 2009

nathanblack said:
volumes have been so low later hard to see how anyone is accumulating or selling down large amounts.

I think alot of people are just sitting on their hands at the moment waiting for DBCT news.

Anyone planning on accumulating would have done it by now. So we have the situation where people aren't willing to buy in at higher prices till after the announcement. and sellers aren't willing to lower prices so close to possibly good news.

fuzzie said:
.

In the meantime, will there be an update about DBCT sale process tomorrow?

I think there will probally be an announcement on completion of the bidding phase stating that bidding has finished, but firm details might not be for a week later. ( but who knows, I am just some nut with a lap top )

investorpaul · 30 June 2009

I was really hoping for an announcement this month. But it doesnt look like it will happen.

Price has been slowly dropping for a few weeks now, I guess traders can put their money to better use with other stocks at the moment.

Mitsimonsta · 30 June 2009

For me, the question now is when any announcement will come out.

Earliest date I can buy is the 10th of July (due to monthly salary going into my account by a certain date). The question is if there is an announcement (or general SP rise) before this date so I can top up a little more.

Holding ~31k units of BEPPA only.

hardyakka · 30 June 2009

persistentone said:
BBI only sees something in receivership if BBI EPS is paid in full. My guess is that they pay the debt holders in full, and the only worthwhile discussion is what is the size of the remaining scraps that get fed to BBI EPS holders. And I seriously doubt that BBI EPS holders would get paid in full. BBI holders are at serious risk of losing it all.

Persisitence,

I do not concur with your view, even in a worst possible case situation. If I recall there would have to be writedowns in assets of about $3.5B before the $1 face value of BEPPA is at risk.

Why $3.5B you ask when NTA is only about $2.4B? If you have a look at previous posts in the last month you will see that IMO conservatively there is $1B of inherent value in BBI not reflected in the financials. This being due to the fact assets are held at cost + CAPEX - Depreciation, and that is after allowing for a general impairment charge of $0.5B.

Now what is the writedown on DBCT going to be? Its in the books at $1.8B, sale price say $2.6 to $2.9B....hmmm...my brain just frazzled.

Cheers

Jez · 30 June 2009

Some mention of DBCT by Asciano, could help with the sale;

http://www.asx.com.au/asxpdf/20090630/pdf/31jb3pk7x51yf5.pdf

shallumstuart · 1 July 2009

Finally some sort of good news:

DJ Babcock & Brown Infra Completes Dalrymple Bay Coal Expansion
01/07/2009 10:01AM AEST

SYDNEY (Dow Jones)--Babcock & Brown Infrastructure Ltd. (BBI.AU) Wednesday said it completed an expansion of the Dalrymple Bay coal terminal in Queensland state, increasing its capacity by about 50%.

BBI, which is trying to sell the terminal, said it has expanded its capacity to 85 million metric tons per year, making it the third largest export coal terminal in the world.

Completion of the expansion has occurred on time and coincided with a marked increase in coal export demand, the terminal's general manager for operations, Greg Smith, said in a statement.

"After experiencing a considerable drop in exports of metallurgical coals in November 2008, the market trend reversed in late February and has continued to climb since then due to strong sales with China in both metallurgical and thermal coals," Smith said.

BBI said indications have been received from producers for further export capacity at Dalrymple Bay and studies are under way to consider the viability of more expansions of the terminal.

-by Ross Kelly, Dow Jones Newswires; 61-2-8235-2957;

investorpaul · 1 July 2009

Euroports deadline also extended until the end of this month.

Hopefully by 1 August we will have a much clearer picture of whats going on.

nathanblack · 1 July 2009

investorpaul said:
Euroports deadline also extended until the end of this month.

Hopefully by 1 August we will have a much clearer picture of whats going on.

i think the euroports announcement was much more significant than the DBCT upgrade. We already new that DBCT upgrade was due for completion by end June(afterbeing revised due to delays) and at end of May it was over 95% completed. i was expecting the announcement almost in leui of any announcement regarding the sale process. i think most buyers were waiting for completion to make things go smoother. hopefully only a few weeks more and we should know more.

the europrts news is positive because it means the potential buyer hasnt walked away yet, they are still going throught the motions of condition precedence and maybe try get a little discount ala QIC/Powerco.

positive reaction thus far to the news, but cant move too much until DBCT sale is known.

cheers

investorpaul · 1 July 2009

nathanblack said:
the europrts news is positive because it means the potential buyer hasnt walked away yet, they are still going throught the motions of condition precedence and maybe try get a little discount ala QIC/Powerco.

positive reaction thus far to the news, but cant move too much until DBCT sale is known.

cheers

With Euroports I saw a positive note in only a one month extension. This indicates to me that they are still talking to serious bidders but just need a little more time to nut out the deal/finalise terms.

If the extension was for 3 or 4 months then there would have been a problem as the deal would be a long way from being finalised. Furthermore given 1 month is a relatively short period of time it is unlikely BBI would announce an extension for only 1 month if they truely believed they would have to extend it again.

nathanblack · 1 July 2009

investorpaul said:
With Euroports I saw a positive note in only a one month extension. This indicates to me that they are still talking to serious bidders but just need a little more time to nut out the deal/finalise terms.
If the extension was for 3 or 4 months then there would have been a problem as the deal would be a long way from being finalised. Furthermore given 1 month is a relatively short period of time it is unlikely BBI would announce an extension for only 1 month if they truely believed they would have to extend it again.

its not about bidders. this announcement is regarding the $30mil deposit a "bidder" has already made. a firm offer has already been made and accepted, the condition precedence has taken longer than expected causing concern that the buyer might retract the offer thus requiring a return of deposit. its clearly just a delay tactic to slightly lower the end purchuse price in the same way powerco went down, but the amount will be imaterial. the important thing will be that it goes ahead and the deposit doesnt rquire refunding.

this announcement gives hope that the sale will go through and condition precedence will be met. 1 month is also great outcome.

investorpaul · 1 July 2009

nathanblack said:
its not about bidders. this announcement is regarding the $30mil deposit a "bidder" has already made. a firm offer has already been made and accepted, the condition precedence has taken longer than expected causing concern that the buyer might retract the offer thus requiring a return of deposit. its clearly just a delay tactic to slightly lower the end purchuse price in the same way powerco went down, but the amount will be imaterial. the important thing will be that it goes ahead and the deposit doesnt rquire refunding.

this announcement gives hope that the sale will go through and condition precedence will be met. 1 month is also great outcome.

Nathan - I should have read the ann clearer. I must admit after the drop in price from 16 c + I have kinda tuned out of the whole BBI/BEPPA thing. I still hold and expect upside but have not really kept up to date with the news.

I cant see why a company would waste time submitting and offer, negotiating, etc and then withdraw (unless there was a material change in their circumstances). I therefore share your view that it is a delay tactic, hopefully they dont knock too much off the price.

hardyakka · 2 July 2009

Here is a quote from an article today.

"Coal queue to ease after expansion

Abstracted from The Australian Financial Review

In early July 2009, up to 42 vessels are waiting to berth at the Dalrymple Bay Coal Terminal (DBCT). However, recent work at the terminal has doubled its capacity to 85 million tonnes and it is hoped that the congestion will ease over coming months. Babcock & Brown Infrastructure Group has announced the sale process for its 29.7% interest in the DBCT will be extended until 31 July"

Seems to me as if there is a distinct lack of understanding in the financial press of BBI's assets, this explaining the credence I give to press reports on BBI.

Cheers

BBI - Babcock & Brown Infrastructure

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