The company told me directly that the $1B of Powerco took away $600M of debt attached to the asset and left $400M in cash, a good chunk of which will be applied to decreasing debt further, although I suspect they will need some of that for working capital. So I reckon it has taken $900M off the debt pile at least.
The plan for BBI is very obviously as thus:
1. Reducing gearing below 60% as they have stated. Increase interest cover as a result. 2. Repay the corporate debt to zero is the main aim in this process. That means $600M odd still to go. That will take a good while I suspect. All of 2009 at least. 3. Do this by partial sale of 3 assets, 1 of which was Powerco which has already been sold at above book value. Pay off the direct debt attached to these assets and then use the surplus debt to clear away corporate debt. 4. Conserve cash by not paying any dividends or bonuses and also reducing costs where they can. You can assume no dividends will be paid until corporate debt is NIL.
They must get their corporate debt to zero. Then, and only then, can any consideration at all be given to first subordinated bonds trading at big discount, and then after that BEPPA trading at a big discount.
It is obvious they have been tasked to tackle the corporate debt situation. As long as it continues to go down then the banks will be satisfied, but I suspect the terms and conditions of rolling this debt over could be very severe, so best get rid of it while these terms are still favourable.
It is pretty clear to me that they have no more funding available to them. They must survive on their own cashflow.
BBI Price at posting:
5.3¢ Sentiment: None Disclosure: Not Held
