Enumerate, good post.
Technically right now, with negative equity, the bonds are indeed worthless, however as you say, if we let the company trade on and complete its development pipeline and use cashflows to pay down debt, assuming the debt for equity swap is allowed to go ahead, some value can be added back over time.
The problem for the banks is that if they want the debt for equity swap to work, they have to deal with the rights of the bondholders. The best thing to do would to ask the bondholders to trade their rights away in exchange for a similar (or marginally inferior) swap that the banks will be getting. From what I can make of the BNB anncmts, I think bondholders will be offered a debt for equity swap as part of the overall debt for equity swap process, and if the entire $600M of bonds are turned to equity, well the company will have positive net assets again.
The banks are so up against it with BNB, and the bondholders likewise are in the same boat. I cannot see how the banks can do a deal and leave out the bondholders (although I could well be wrong).
I think it is better off suspended while this is sorted out. Hopefully we find out the story next week.
BNB
babcock & brown limited
