Whilst looking forward to hopefully a good outcome to their strategic transaction efforts, I have mixed emotions regarding the declining interets rates. BBP has interest rate swaps in place at above current low levels, thus in the event of a sale of assets the bowwings need to repaid and there will be penalty payments which could be large. i.e. $2B of 3 year swaps 3% out of the money would cost some $180m to close. likewise if the strategic transaction results in a takeover of BBP, the bidder will discount the price to account for the out of money swaps. That said a lower interest rate environment reduces the funding costs for the purchaser and hopefully this increases the value of the assets by enough to neutralise the swap closure costs.
BBP Price at posting:
6.4¢ Sentiment: ST Buy Disclosure: Held
