Seeing the price go so far down, I was tempted to buy some of these today, but I considered this is way too risky for me. All I see is high volatility in the coming weeks with the share price slipping further down. The only thing that will save the SP going sub 1c over the coming weeks/months is news of a satisfactory price being achieved with a sale of the Dalrymple Bay Coal Terminal. Without this BBI will struggle.
...From Westpac on BBI
The group is highly geared,
interest cover is marginal
and free cashflow is tight.
Distributions on the stapled securities and dividends on the preference shares have been suspended until further notice. BBI has begun selling part-interests in assets to reduce debt but there is uncertainty about the timing and adequacy of proceeds from future asset sales....
...Volumes at PD Ports and Euroports could come off due to the world recession, with IEG’s UK residential gas and electricity connections business to be affected by the UK downturn.
...BBI has a staggering $9.8bn of debt and on December 31 EBITDA coverage of interest expense was 1.71x. BBI is selling off the farm to reduce gearing and interest expense. $300m of debt was repaid last week after the sale of 58% of Powerco NZ and 29.7% of Euroports. Discussions are underway about the sale of a further interest in Euroports and for stakes in WestNet Rail and PD Ports.
..The overall financial profile however is still aggressive and liquidity is tight. Gearing on December 31 was 403%! BBI’s plight is clear from its attempts to sell equity in the group’s premier crown jewel, the Dalrymple Bay Coal Terminal. Presumably it is doing so with great reluctance.
Asset sales at satisfactory prices will be difficult in the global recession and credit crisis. There is no certainty about the final asset portfolio and cashflows.
BBI Price at posting:
4.8¢ Sentiment: Sell Disclosure: Not Held
