age article re bbi, page-2

There seem to be a million rumours... from the Brisbane times...

Rumour mill grinds $600 million from BBI trading halt
XCHANGE
September 3, 2009

NOW that reporting season is over, the market has been forced to look elsewhere for intrigue.

Babcock & Brown Infrastructure helped to fill the void yesterday when it entered a trading halt pending a possible recapitalisation plan with assistance from a cornerstone investor.

Gresham, Credit Suisse and Macquarie Capital are understood to be advising BBI on the deal, which involves a private equity group.

No names were mentioned, but it could be one of the groups that lost out on a deal with Asciano, such as TPG, Carlyle or Kaplan Funds Management.

As a guide, BBI has about $1.2 billion of debt at the corporate level, so the recapitalisation would presumably want to erase more than half of that.

Warburg Pincus recently helped to recapitalise Transpacific Industries alongside a 1.77-for-1 rights issue to existing holders, but in this case the ratio of new shares to old shares will be higher.

Unless the shares are consolidated afterwards, there could be 10 billion or so on issue by the time the deal is completed, since BBI last traded at just 7.8c with 2.6 billion on issue, giving it a market value of $202 million.

It is worth noting that in the Transpacific case, Warburg Pincus injected $64 million in a placement, served as a sub-underwriter of the rights issue and also received warrants that will likely increase its future stake for its troubles. The private equity group now owns 34 per cent of Transpacific.

It appears that BBI's new investor will also take a direct stake at the asset level, likely in the Dalrymple Bay coal port that Macquarie had been trying to flog on behalf of BBI.

Depending on the structure of the investment, presumably some of that could be put towards repaying the parent company's debt rather than the port's $1.7 billion of debt.

At present BBI's most pressing concern is the $169 million of corporate debt that needs to be repaid in February.