bbi activates brookfield solution

Babcock and Brown Infrastructure has activated what amounts to the largest of the market's recent recapitalisation deals. Its $1.5 billion plan will bring in Brookfield Asset Management of Canada as a cornerstone investor and allow it to repay its corporate debt.

Macquarie Capital and Credit Suisse hit the phones yesterday to tap institutions like QIC and Colonial First State for an underwritten placement of $600 million or so, which will be matched by Brookfield.

Because of the risks involved with BBI, the investment banks were also looking for sub-underwriters.

The idea is to have a complete solution to its financing problems ready to present to the market by Monday, with its banking syndicates also signing the deal, as occurred recently with Elders and AWB.

As part of the arrangement, Brookfield will also take direct stakes in some of BBI's assets, including the Dalrymple Bay coal terminal, at an overall 13 per cent discount to their current book value.

The institutions and Brookfield will pay the same price for the shares issued in the transaction, which will require shareholder approval. There were suggestions the issue price may be above the last closing price of 5.3c, based on a series of metrics other than current trading.

The reaction remains to be seen given that some fund managers have recently questioned the underlying quality of the assets.