Notes attached from the Singapore tele-conference this morning:
Decision to suspend distributions was to maximise cash within the company in the event of refinancing difficulties BBI confirmed that the Board met the morning after the announcement of the sale of part of its stake in PowerCo. At the meeting the Board made the decision to suspend the distribution to maximise cash reserves in the company in the event of refinancing difficulties. BBI maintains that this decision was not in response to concerns about the operating performance of its assets nor is it an indicator of stress within BBI. Given deteriorating credit markets, the company is concerned banks may not come to the table to refinance its debt due to mature from now until 2010, particularly debt at the corporate level. BBI has A$100m of corporate debt due for re-fi in February 09 - whilst the sale of 50% of Powerco is sufficient to pay this debt, the receipt of the proceeds are likely to be one month post the debt maturity date (and will depend on the timing of approval from the relevant regulatory authority in New Zealand). The company expects that the lenders' will extend the debt maturity date in the event the Powerco proceeds are delayed.
Asset sales BBI noted that the price offered for 50% of Powerco was the best offer on the table - the offer for 100% was far less attractive hence the reason only 50% was sold. The process of selling the EuroPorts assets is progressing with discussions continuing with a number of parties. BBI is hopeful it can announce a sale in the near future. BBI has received a number of unsolicited offers for its other assets - and BBI will consider all reasonable bids. However the company made it clear that it would not be pressured into a fire sale of its assets to opportunistic bidders - i.e. it will not sell assets at prices that are only equal to the value of the proportional debt owing on the assets.
Debt Covenants BBI has no debt covenants related to its share price (or the BNB share price). It has two debt covenants: 1) Cash flow/net interest cover calculated on a 12month look back - BBI will be in breach if this falls below 2x (currently at 7.4x); and 2) Asset value - BBI noted that an impairment test was conducted for its 30 June 08 accounts of which no asset impairment was recorded. Only two events can trigger an asset impairment - i) physical destruction of an asset that is not covered by insurance e.g. an act of God; or ii) a rogue regulatory decision that may effect the present value of future cash flows. No asset impairment can occur due to a fall in the BBI share price.
Our per share valuation of BBI's assets BBI could not comment on the our per share valuation of each asset, but noted that our per share valuation of BBI's total assets of A$1.20 ps was close to the NAV of A$1.23 ps in their last annual report. BBI noted that it's assets are recorded at book value and that many of these assets were acquired many years ago. PowerCo was sold at a 25% premium to its acquisition price.
BBI Price at posting:
9.0¢ Sentiment: LT Buy Disclosure: Held
