market cap and nav, page-94

As we get closer to Wednesday the emotions of: panic, fear, greed, excitement and anxiety become intensified and cloud sound reason and prudence.

I think it is time for all holders to take a deep breath, think long and hard about the FACTS in light of their own experiences and expertise and then make their own judgement about the future of BBI. The media are not really with the programme. Some posters here aren't either.

In my view the following issues in order are: DBCT must sell, BBI needs good management, BBI needs cash flow, BBI needs to communicate effectively and BBI needs cash flow.

In relation to the death spiral if it truly takes hold - those securities in its path will be destroyed, the last to convert will own the company. After the last conversion (ie. BEPPA, and yes even its massive like 11 billion shares or whatever) and provided that BBI is still alive (like the proverbial Lazarous with a triple bypass), the elephant will have left the room, the dust will settle, and the market should price BBI more rationally. This final conversion should happen just following the DBCT sale. Management can either do this the friendly way or the hostile way.

The BBI price recovery is subject to, and will vary upon the approach taken to retiring debt and retaining certain assets. It is crippling for BBI to simply make repayments when they are just covering interest bills which exceed the returns from their underlying asset. It is also bad for BBI to engage in a fire sale of good assets at recession prices (which assume lower multiples, higher risk premiums and higher costs of capital which are fictitiously based on sentiment and economic "data") as it hands over free wealth to the buyer.

DBCT is a gem: in the best economy and country on the planet, as recession proof as it gets, and as capable of actual and projected growth as it gets. This is no snake-oil sales job. This is a rare asset. Anyone would buy it over $3 billion in Treasury Bills. If XYZ Coal Mining Ltd are at maximum capacity and throwing off cash, what better (and more logical) way to get a great return on investment and locked in growth than from vertical integration? Who says no? Rockefeller's Standard Oil built its oil refining monopoly by purchasing railways.

This post contains only speculation and opinion. Under no circumstances should you rely on it.