age article re bbi

BBI entices partner to get debt down
DANNY JOHN
September 3, 2009

BABCOCK & Brown Infrastructure is planning to bring in a new cornerstone investor who could end up owning a significant stake in the debt-laden group.

It is part of a financial overhaul to clear at least $750 million of corporate borrowing.

Details of the proposed deal could be announced as early as today and are thought to involve a private equity player taking shareholdings in both the ASX-listed fund and in one of BBI's key assets, such as the giant coal exporting terminal at Dalrymple Bay in Queensland.

Discussions about the refinancing move are believed to centre on a rights issue which would raise between $500 million and $600 million, given BBI's current sharemarket value of $202 million.

The fund, once part of the failed Babcock & Brown asset management empire but soon to be renamed Prime Infrastructure, has nearly 2.6 billion shares on issue.

Any refinancing will be heavily dilutory if shareholders choose not to participate in the raising, which could be underwritten by the new cornerstone investor.

BBI's shares were placed in a trading halt at 7.8c yesterday after the company disclosed that talks about a ''recapitalisation transaction'' were occurring with an unnamed party.

Additional sums to deal with BBI's corporate debt of $1.2 billion are likely to be raised through a placement of shares to the new equity investor - thought to be between 10 and 20 per cent - and through the sale of a minority stake in Dalrymple Bay.

The terminal, which is the largest in the world, is said to be worth $1 billion in total, but it also carries its own separate debt load.

However, the terms of the investment in BBI are far from finalised.

The company is likely to indicate that, apart from securing the support of its existing shareholders, any equity injection and asset sales would require the approval of its bankers. The group has almost $10 billion of debt in total.

BBI has been seeking to sell part or all of the Dalrymple Bay terminal through a separate process being run by Macquarie Capital Advisers. The aim is to raise extra cash to reduce debt at both the main company and the terminal.

But the latest negotiations are being driven by the need to recapitalise the corporate structure and rid the company of between two-thirds to three-quarters of its current borrowings.

BBI has a deadline next February to pay back $170 million of corporate debt and it then has to clear another $585 million between December next year and February 2011.

The prospect of existing shareholders realising much value in the short term appears slim. Analysts at Goldman Sachs JBWere say the near future ''remains very challenging''.

However, a successful refinancing would help to at least stabilise the company and avoid it going the same way as Babcock & Brown.

Last week it announced a net loss of $1 billion after writing down the value of its port and transport assets by $895 million. But it said the cash flow from the businesses was covering its debt payments, and it had not breached any of its banking covenants.