sparcs, page-11

You may well regret asking me that emark. It all depends emark on a multitude of factors:

1. Whether SPARCS bonds get paid out in cash or shares. That is NZ$142M to convert into shares. Until they negotiated the rollover, it looked as though these were going to convert into shares. Note that although BBI Networks bonds have a higher security than the SPARCS bonds, the SPARCS bonds have the advantage of maturing earlier. Therefore I strongly suspect that the major SPARCS noteholders will not rollover a second time if the need arose to do so. Their only significantly leverage is keeping their maturity date in front of the BBI Netwroks bonds, but if the company does not have the cash by May 2010 when the next conversion date comes around, a lot are going to opt for shares I suspect. The senior banks are totally not going to let the SPARCS bonds get paid out in cash until they are satisfied as to the viability of the company. The threat of dilution right now remains very significant from the SPARCS bonds.

2. Whether BBI Networks bonds get paid out in cash or shares. That is NZ$150M to convert into shares. The sweep facility, assuming there are significant asset sales, will trigger significant payouts of these bonds and therefore hoepfully avoid quite a bit of dilution.

3. Whether BEPPA gets converted into shares or paid back. That is $700M capital, plus the accrued interest. This interest will continue to accrue to the SPARCS maturity in 2010 and until the BBI Networks bonds are fully paid off. This will take this liability well past $800M. I just cannot right now see where the money for this is going to come from. Unless the company restructures these to limit the dilution and comes to some agreement with the holders on the deferred interest, there is going to be significant dilution.

4. Whether the company can engineer enough asset sales to repay corporate debts before they fall due.

5. What value the market is prepared to place on highly geared companies like BBI.

Personally myself I think if they get the asset sales away as we expect the company to, they hopefully will be able to repay 1 and 2 and I think they will be able to satisfy 4, but they will not be able to repay the preference shares without further significant assets sales over and above what is already planned. This will force the company to try and restructure these prefs to try and limit the conversion factor and therefore try and avoid some of the dilution.

If the company has net equity of around $2.3B and 2.3B shares on issue, then that seems to be where this $1 NAV per share is coming from.

Assuming both sets of bonds are redeemed for cash, by applying different dilution factors to BEPPA, the potential NAV's look as follows:

at current price 5 cents, extra 14B shares get issued, that makes a NAV per share of 13.7 cents.

at 10:1 conversion, extra 7B shares, NAV 23.2 cents.

at 5:1 conversion, extra 3.5B shares, NAV 35.6 cents.

HOWEVER, the market is assuming (rightly or wrongly, and I think wrongly) full conversion of everything with no restructuring and total dilution.

at 5 cents, that would be an extra 21B shares and a NAV of 8.4 cents. THIS IS WHY THE MARKET HAS BBI AT THESE LOW LEVELS.

Personally I think there are great opportunities to make money here, but to simply post that the NAV is $1 is really naive. Why some posters are unable to get a grip on this, well it beats me. So therefore I have put down in writing the maths for you to digest.

Happy to discuss it further in a logical fundamental manner.