otakou, I do not agree with your bond calcs in that post.
There is approx A$1.4B corporate debt, which includes the NZ$150M owed on the BBN020's, but it does not include the now NZ$117 owed on the SPARCS.
The BBN020's are part of the sweep process and this sweep process is biased 2/3rds towards all corporate debt and 1/3 toward the most immediate maturing debt. Given that the BBN020 technically mature in 2012, only 2/3rds of their share of the overall sweep money will be applied to the onmarket buyback process of these bonds as there are many other facilities that mature before this.
The dollar amount that will be swept is then dependent on how much of DBCT is sold. There are two likely scenarios:
1. BBI sell 49% of DBCT. Who knows what the price will end up as being. For the sake of this argument, let us assume this leaves free cash of A$500M. The portion applicable to the bonds would therefore be:
A$500M x 2/3 x 10% /.8 = NZ$40M
The .8 is the exchange rate and the 10% is BBN020's approximate proportion of overall corporate debt.
This would mean the company would be obliged, via the sweep, to come into the market and buyback NZ$40M of the notes. Who is to say what price that would be at, but I would guess somewhere between 60-75 cents on the dollar. For an amount that size they may conduct a "Dutch auction tender" or a "reverse tender" for the whole amount and ask for offers to be placed in the market to determine a sale price to get something like this done all at once.
2. BBi sell 100% of DBCT. Assuming that frees up A$1B, then the calculation of sweep money available would be:
A$1,000M x 2/3 x 10% / .8 = NZ$83M.
Now if the company came into the market to buyback NZ$83M of this issue, well that would really put the cat amongst the pidgeons. You would be forever trying to do that on-market, so I am sure some sort of tender process would again be required, but it is fair to say that an $83M buyback on an $150M issue is going to put a pretty big dent into the number of these bonds on issue.
Furthermore, with a 100% sale there could be a possibility that the BBN020's become the nearest maturing corporate debt, so once the others are repaid that date prior to the bonds, well the swept amount could go higher. Not too sure on that one right now, but it is worth noting.
I hope that helps.
PS I went to the meeting this morning. I will give a report later on after I have had some lunch. Was very interesting.
BBI Price at posting:
10.0¢ Sentiment: None Disclosure: Held
