My inbox has been smashed. 76 requests so I have decide to cut and paste what I can and the tables will just have to be deleted.
Babcock & Brown Infrastructure (BBI.AX)
Recommendation: Hold Target price: A$0.05 Current price: A$0.035
Looking at a possible worst-case scenario, the conversion of SPARCS could be 45% dilutive to BBI security holders. In the scheme of things, the potential conversion of the SPARCS and its dilution impact is not as significant as the need for asset sales which are crucial to ensuring BBI remains a going concern.
There are approximately 146.2 million BBI NZ SPARC's on issue, with a face value of NZ$1.00 each. All Holders have the ability to request conversion of 50% of their holdings on 17 May 2009. Holders have the ability to request conversion of any remaining balance of their holdings on 17 November 2009.
The current intention is that SPARC's will be exchanged for BBI Stapled securities. This has the potential to significantly dilute the value of BBI Stapled Securities, depending on both the 20 VWAP (up to 17 May), the prevailing exchange rate and the amount of SPARC's holders who elect to convert.
BBI currently has 2,376 million stapled securities on issue. Assuming a VWAP of $0.03, an exchange rate of 1.27NZD per 1.00AUD and a maximum possible conversion on 17 May (i.e. 50% of the SPARCS or 73.1 million) this would add another 1,919 million ordinary securities - having a 45% dilutive effect. This is probably a worse case scenario as we do not know how many SPARCS holders will elect to convert, nor what the VWAP price or exchange rate will be. The alternative to converting for SPARCS holders is to accept a new interest rate of 10% with a reset date of 17 Nov 2010 (unlike the BEPPAS distributions on the SPARCS continue to be paid).
If we assume all SPARC holders convert at $0.03 then this would change our per security valuation of BBI from $1.00 to $0.58 (by adding back the $130m SPARC's debt to the equity value and dividing by the new number of securities - 4,306 million).
BBI Price at posting:
3.3¢ Sentiment: LT Buy Disclosure: Held
