sparcs beppa tradeoff, page-11

The correct codes on the NZX are:

BBN010 for the SPARCS bonds
BBN020 for the BBI Netwworks senior bonds


After the fiasco of the SPARCS amendment special meeting in May where the amendments were voted down, those who elected to switch to shares did their switching and sold out quickly. Some lucky bugg3r who bought the SPARCS shares at 15 cents on the dollar then got about 42-43 cents of value for the shares they sold straight after conversion, and still owns half of their holding. They get the chance to convert the rest of his holding into shares in Nov 2009 and then has totally realised their profits altogether. So BBI only has to survive to Nov for the SPARCS holders to clear out altogether.

Still, November is a long way away in the current market. Lots of things could happen to affect both bonds, eg:

1. If DBCT sells for a good price, and they sell 100%, will probably generate approx A$50-60M of buyback on the BBN020's via their share of the sweep facility. This would take ages to do physically onmarket, so I suspect they may hold a reverse auction via the market offer process to do this buyback all at once. I suspect this would send the bond price probably to around 60-70 cents, but the discount on cancellation would also create a profit for the group and add to their equity position.

2. If the much discussed rights issue (on this site anyway), along with a prefs restructuring in tandem that would be needed for such as issue to be successful, were to take place, then just maybe (and I mean maybe) some cash may be found from the issue to redeem some or all of the SPARCS for cash and drastically reduce (or eliminate) any further dilution to the ords holders. The ordinary share price would really start to rally if something like that was to happen.


For BEPPA to give such a great return, either the company needs to supply indefinitely, or some compromise with the BEPPA holders is reached to restore some value to the prefs holders. And right now, in the absence of such a proposal, that does not appear to be happening, hence the BEPPA is treated like equity and will continue to trade at these prices. I cannot foresee, under the current circumstances, any interest being paid for years to come. In fact, if you are a BEPPA holder I would more or less give up any hope of ever seeing your interest.