I note that Citi changed it's recomendation to buy on Friday...

I note that Citi changed it's recomendation to buy on Friday with a target of $1.70. Hold on guys, we will come out of this ok. Article below.



Wheels & Deals
2:18 PM, 21 Nov 2008 Giles Parkinson

Babock & Brown Wind Partners (BBW) has laid the groundwork to cut itself adrift of its sinking parent by renegotiating its management agreement and hiring UBS and Mallesons Stephen Jaques to review the future relationship between the two companies.

BBW, like the other specialist listed infrastructure funds within the group, has negotiated a lower base fee, ended the exclusive advisory agreement with the mothership, and suspended all incentive fees until its stock regains the levels of earlier this year before the credit crisis lit a bomb under the group’s collective and individual market values.

The new agreement struck by BBW is strikingly similar to those gained previously by Babcock & Brown Infrastructure and Babcock & Brown Power, but the timing of the agreement, coming as it does after B&B shares were suspended and its credit downgraded to below junk bond status, is important as it will enhance BBW’s ability to manage its own destiny.

In the case of BBW, the base fee is reduced from 1.4 per cent to 1.0 per cent of the first $2 billion of “net investment value”, which is broadly similar to BBW’s market capitalisation.

Last year, BBW paid a base fee of $20 million to B&B, so under the new model that would have been reduced by nearly a third. With BBW’s market capitalisation now down towards $500 million, the fiscal 2009 fee would be around $5 million if nothing else changes.

The new threshold for a resumption of the incentive fee is $1.80, the price at which BBW issued stock to institutions in May 2007. BBW shares are currently at 64 cents.

However, BBW may go further than its sister funds and has also retained UBS and legal firm Mallesons Stephen Jaques to “review the broader relationship” with B&B. This is thought to include B&B’s 11 per cent stake in BBW and the future of any management agreement between the two groups.

Following the agreed sale of the jointly-owned Enersis wind farm portfolio for $2.2 billion last week, B&B and BBW’s various wind farm portfolios have little crossover, with B&B focussing mostly on construction and development and BBW on operating assets.

The announcement today also provides BBW with the ability to fire staff assigned to BBW from the parent group and set their remuneration, and will see the company have one less “non-independent” director on the board. It now has the right to make decisions contrary to management recommendations and it is separating its information systems from those of B&B.

Tellingly, in light of the market fears about the future of the parent, BBW has also won the right to internalise management in the event of a “termination right” in favour of BBW for a price equivalent to the manager’s net equity value.

In the event that this occurs, B&B has has agreed to waive notice periods and restraint of trade periods in the employment contracts of staff employed by the manager.

One of the termination events is the insolvency of the management company, although this refers specifically to the entity that has the management rights, rather than the parent company B&B.