yet another try to calculate beppa value, page-81

I too have run several scenarios Dis as to how much capital on hand you need to have if you buy the prefs now and the expected rights issue comes along that BBI are signalling will happen. This is really hard to work out as there are so many different things that could happen.

That ratio depends on several factors:

1. Whether they offer BEPPA holders and SPARCS holders a conversion at a set ratio or whether they simply force them through at par.

If they offer them a set ratio and it goes through, then there will be less overall shares on issue. My previous calcs a couple of days ago reckoned that the issue on the ords would be 3:1 at 5 cents if prefs got 5:1 and SPARCS got 15:1 (which are highly subjective figures)

Therefore if you spent A$10K buying 100K prefs and these turned into 500K shares and then 3:1 issue if 1.5M shares at 5 cnets, well that is A$75K for A$10K invested, so that is 7.5:1.

1a. Under this scenario they offer pref holders a set ratio, but allow SPARCS holders to convert at par. This does not make a huge difference to the overall number of shares on issue, but may mean less to hold in $ if you are a prefs holder and more if you are a SPARCS holder.

2. Sometimes these moneys are raised in two way. One, a large placement to a CI, and then secondly a rights issue in over the top, underwritten by the CI. The AFR suggested $600M of each, with some form of forced conversion onto the BEPPA and SPARCS holders. If this was the case, then the rights issue is only half as big, therefore roughly speak on 5:1 dollars held versus dollars spent on prefs.

3. There are a few other really really severe scenarios that Melua is talking about, like an issue at 1 cents or less. I personally think that is too severe, but again I don't think they can be ruled out. I just prefer to see them as the far end of the spectrum. I am not sure what ratio of dollars invested in prefs to rights issue contribs these would work out to be.

4. And of course, how much money is actually to be raised is also critical to the calcs. General talk here of raising $3-400M etc is miles short of what is needed. I think they need to do at least $1B at the very minimum and frankly I would like to see up to $1.5B to settle the whole thing once and for all. If it is priced attractively, the smaller holders will probably not take everything up and neither will BNB with its BBI holdings, but the instos will line up to put their snouts into this trough for sure.

5. The sale price for 49% of DBCT (if indeed this happens) and whether that sale leaves any leftovers for BBI in terms of the sweep (ie I mean reduction of debt from the sweep prior to the rights issue meaning less may need to be raised).

My overall gut feel is $5 of cash needs to held for every $1 invested in prefs at 10 cents, but I could be completely wrong. Still, I cannot see how it can be much more than that, but you never know what is being planned. We really are sort of guessing at this, but it is good to have a try all the same. By my judgement/best guess you don't need to hold loads of BEPPA unless you have a truckload of money to take up your rights.

For me the end game is getting entry to the rights issue (if one happens at all). The more rights I can manage to take up, the more money we are going to make, because my calcs generally assume the rights issue pitches at 50% of diluted NAV, so that the CI and anyone taking up the issue get a good deal for bailing out the company.