THE consortium of international hedge funds bidding to inject much-needed capital into Babcock & Brown Infrastructure faces an uphill battle to persuade the company's board of the financial merits of its offer.
In a sceptical response to the proposal lodged last week, BBI said the combination of new bonds, a revamped corporate lending facility and the raising of new equity would not make a great deal of difference to its immediate debt problems.
The ports, transport and energy distribution group told investors yesterday that the proposal from the Royal Bank of Scotland-advised consortium would result in half the $400 million of new equity to be raised being used to cover the deal's financing costs.
As part of the proposed injection of $1 billion, BBI's existing security holders would be asked to contribute $200 million of additional equity, with another $200 million coming from the consortium and $600 million raised from the issue of corporate bonds.
A recapitalised BBI would also have access to a new debt facility of $350 million to replace a $300 million loan due to be repaid by February.
But the company insisted yesterday the net injection of $200 million in new equity would not ''materially change'' its current debt-to-equity gearing levels at the corporate level or deal with the shortly maturing loans within its operating businesses.
Both issues would be central to the calculations by BBI's directors as to whether the company would be able to raise additional capital from its security holders, whose stock has been battered by the global financial crisis.
BBI shares are now hovering at almost worthless levels, having fallen from almost $2 in early 2007 to just 5¢ in recent weeks.
The tone of yesterday's comments suggest that BBI continues to favour an earlier recapitalisation plan put forward several weeks ago by Brookfield Asset Management.
BBI Price at posting:
5.1¢ Sentiment: None Disclosure: Not Held
