"On a final note, you can't translate the current market price into a percentage probability of success. That's ridiculous. The price represents the market view of the risk premium required to hold the note. As an example, if BHP issued a zero coupon note trading at $90, would you assume the market is suggesting there is a 10% chance BHP will go bust?"
What an absurd statement, swaps. How you can compare a zero coupon bond to this situation, super LOL. And furthermore, the market prices all securites on how successful they will or will not be. I mean, crikey dick, that's how the market works!! Granted, the market at the moment is very pessimistic and prices for stocks in sticky situations are really assuming the worst, but there is no way in a gazillion years that BNB are going to offer you $100 of full value for your BNBG in a debt for equity swap. If the market is valuing these bonds at less than 10% of its face value, well surely that is sending out a really clear message of what the market things (rightly or wrongly).
We'll soon find out on Jan 9 I suppose. Would LOVE to be wrong. Won't be.
"In my opinion, this is a simple all-or-nothing play. Either the company will rise from the ashes and BNBG will return in time to par ($100) or the company will go belly up. With the banks giving some working capital to BNB due in Dec 2009 and allowing the company to 'pay as you can' interest, I'd say there is a lot of support to see BNB through this (temporary) distressed state. "
Man that is incredibly naive. If you, as a BNBG holder, and just prepared to dismiss all the middle ground between $3 and $100, may God have mercy on your soul.
There is $600M of corporate bonds on the BNB balance sheet. Currently these show in the liabilities column on the balance sheet. If you switch $600M out of the liability section and add it into the equity section, that is quite a big change. That is $600M less debt to service and $600M less debt to pay back. Furthermore, all the negative implications of having your debt in default (especially given the rights of the BNBG holders against the company in that situation), well the company will be keen to rid itself of this problem.
BNBG holders need to be realistic. You will not see $100 of value for your bonds in a debt for equity swap. We will find out exactly what is in store on Jan 9.
BNB
babcock & brown limited
