get real, page-12

I'm waiting patiently at 20c. Hot off the press from a morning meeting:

Key points:

1) Dissolving the management agreement would go a long way to restoring investor confidence in BBI

We believe that the independent directors are going to be looking for more drastic changes as a result of the management agreement review, a lot more than what the market may be factoring in. While implementing some form of
high-water mark on performance fees would at least show that BNB are willing to more closely align shareholders interests with their own, in order for BBI to have a strong chance of a recovery, far more serious measures need to be taken. We believe the key move the ID's need to push
for is the removal of the management contract (which is also achievable by a simple majority vote), thus allowing internalisation of management and a distancing of BBI from the headstock.

2) BBI has limited ties back to BNB

BBI is in a very different position to what BBP was in. BBI has no material cross ownership of assets with BNB (the only one is BNB's ~3% stake in NGPL) and has no inter-company loans with BNB or any other satellite vehicles. BNB does have an 8% stake in BBI, in line with other funds (12%
in BBW and 9% in BBP).

3) Debt is an issue, but is it enough to bring down the fund? We think it is unlikely.

We don't try and pretend that BBI are not over geared at the moment and this is obviously a key area of concern given the current global credit environment. However, BBI are not in a position currently whereby banks are going to be forcing them into a firesale of assets in order to reduce debt levels. With two thorough audits having been recently completed on all of BBI's assets (one pre-BBP write down and one post), the company remains confident that it is not facing any major write-downs (other than a maximum of A$100m on Powerco, which is more likely to be $0-50m) which will impact lending. Further to that, we believe that if BBI were able to dissolve the management agreement and distance themselves from BNB, then funding would definitely be easier to achieve.

4) 70% fall in 2 months - time to step up

While there is certainly a lot of uncertainty around the immediate outlook for BBI, we believe that the collapse in shareprice has probably given the ID's more firepower and more reasoning to try and distance the fund from the parent entity. Management still expect to give an update on the
progress of the review by the end of the month and in our view, this could be a key catalyst for the recovery of BBI. With some massive volumes going through the stock in recent weeks, we believe this will have been largely as a result of retail investors finally losing patience, an increased
number of margin calls and certain lenders reducing the LVR to below 50%.
But for every seller there is a buyer!