melua's friday musings

Plough,
Thanks for those kind words.
I call it as I see it. When I bought BBI heavily last November I did so because:
a. I knew the market had panicked about the BNB association.
b. I knew instos were dumping through redemptions/fear with no regard for BBI's NAV which at that stage was above $1.00
c. I was confident in BBI's assets, especially DBCT, NGPL and at that stage, PD Ports.
Risk reward: NAV $1 Price: 3c.

Looking forward, I envisaged a much quicker disposal of assets and to be honest, if you asked me in November what BBI would trade at in August 2009, I would have said a lot lot higher than 9c. Probably around 25c and BEPPA 40c.

Asset sales have taken much longer. They got stitched up on both Powerco and Euroports and the Euroports sale dragged on for months and months. I also did not envisage the banks being so greedy. I knew they were greedy but what they have done in jacking up interest rates on distressed companies is not right. The problem with BBI's banks is that it is a syndication and made up of some overseas banks who are struggling themselves and need cash.

So, where are we now? Well, we are closer to a DBCT sale than we were six months ago, but will it sell in "one to two months" as per the CEO's comments? There is no guarantee and there is no guarantee on price. Do I think they will get a good price? Yes I do, but one must look at the consequences for the BBI security price if they do not get a sale by end of Oct. SPARCS has the potential to dilute securityholders very heavily. People like TTC say so what? The NAV is still well above 9c, or 5c or whatever the price is after dilution. That is true, but as dilution gets greater, the consequences of a capital raising are more dire for existing securityholders. To raise fresh capital it is best to have a strong share price. They also have a big payment due on corporate debt in Feb 2010. That date is looming. Can people see why it is so critical for them to raise at least $500M free cash by way of asset sales? DBCT can do that. Please be aware of the consequences if DBCT is delayed beyond SPARCS conversion though.

I still believe in the Net Asset Value of BBI and long term I am very bullish but there are far more risks to the short term BBI price right now than there has ever been. They own over $10Bn in assets that are only generating free cash flow after commitments of two tenths of a banana sandwich. Thankyou thieving banks!

I think most people would prefer I tell it as I see it. If that means I am short term negative on BBI for whatever reason so be it. Also, don't believe for one minute I am posting negative things because I am short BBI. I am short for 500K at average 7.3c. That equates to having a total short position of $36,500. Remember I currently own 3.8M BEPPA so if my short position goes the wrong way, I win big time on my BEPPA holding as BEPPA goes up if BBI goes up. Every 2c rise in the BBI price will cost me $10K on my short position. At the same time, if BEPPA rises 2c, I am $76,000 better off. Do the maths. I honestly don't give two flying hoots if the short position beats me and I close out a loser on it. I took the short position because I believed the market was wrong on Wednesday. I get great satisfaction if I beat the market. Right now, I am wrong on the short call but it really is of little consequence. I would rather just post things as I see it.

People can see the rampers on here. I am not one of them. They are like comets. They come and go. The volume on Wednesday attracted them all to BBI and now they are all experts. Let's see where they are in a month.