massive wall being built, page-41

"proceeds of DBCT sale will reduce corporate debt $1:$1 but the bonds can be repurchased at a discount. the banks wont accept anything less than 100%."

Assuming DBCT sells and there is a reasonable amount of money swept, just exactly how they go about the bond repurchases for the BBN020 will be interesting to see.

My rough calcs a while back on a sale of DBCT at $2.6M had approx A$800M as leftover cash. If this is swept 1/3rd to the nearest maturities (ie A$266M) and 2/3rds to pro rata across the remaining corporate debt, it will wipe out the Feb 2010 and Dec 2010 corporate debts of A$273M in total (because some of the pro rata 2/3rds will also apply to these debts).

Therefore A$534M will be spread across the remaining corporate debt of which the NZ$148M remaining BBI Networks bonds are a part.

If corporate debt is right now approx $1,407M (as it says on page 26 of SPARCS amendment prospectus, post the Powerco sale), and the DBCT sale figure I used wipes off the A$266M of near term maturities and leaves a balance of $1141M corp debt to go and the BBN020 bonds represent 10% of that outstanding corporate debt (ie NZ$148/A$1141), then 10% of the 2/3rds of the sweep will be allocated to a buyback of these bonds.

That will be 10% x A$534M = A$53M = NZ$66M to the buyback fund.

Given that there are only NZ$148M of these bonds left on issue, that will be a pretty hefty buyback and you would think this would increase the bond price somewhat from the 49 cents where it is currently at. You would think to get some decent volume you would need at least 65-70 cents before you would get some decent sellers of these bonds.

Most of the holders of these bonds will be NZ instos and large broker custodial accounts. They are mostly very bearish on anything with a Babcock in its name, so I would imagine they will be lining up to sell.

Using the same logic on different sale prices, the bonds buyback amount would approximately change as follows:

$2.7B = $75M buyback
$2.8B = $84M buyback
$2.9B = $91M buyback
$3B = $100M buyback


The key thing is - DBCT needs to be sold, and it ain't a done deal yet.