BBI recapitalisation plan gets the nod

Tuesday 13th October 2009

Babcock & Brown Infrastructure, the troubled Australian investment company, has received a cautious approval for its recapitalisation proposal from independent financial advisers Grant Samuel.

Under the proposal, BBI would raise A$1.5 billion, with Brookfield Asset Management taking a cornerstone holding for A$625 million, an underwritten placement to institutions for the same amount and a security purchase plan for A$250 million.

The infrastructure investor has total debt of A$9.2 billion and needs extra outside investment to remain in business and repay forthcoming loans. BBI expanded rapidly, ramping up its gearing levels via debt-based growth. The global financial crisis left it exposed and resulted in the company being put in administration in March 2009.

“The recapitalisation will provide a comprehensive solution to BBI’s financial position,” the Grant Samuel report said.

“It will allow the repayment of all of BBI’s corporate debt (excluding approximately $119 million of New Zealand corporate bonds) and the resumption of distribution payments to holders of securities.”

To pare back debt levels, BBI has sold assets including 58% of Powerco, New Zealand’s second-largest natural gas and electricity distributor, which was acquired by Queensland Investment Corp. for $421.2 million.

Still, Grant Samuel warns that further asset sales will not be adequate to cover maturing loans and that BBI has no choice but to raise new equity.BBI has three classes of securities, some of which would be paid out ahead of the others if the assets were disposed of in a fire sale.

Grant Samuel acknowledges that the valuation of BBI assets is tenuous at the best.

“In the absence of the recapitalisation, there would be a real risk that BBI would ultimately be placed in some form of insolvency administration, in which case holders of securities would almost certainly realise no value,” the report said.

Accordingly the recapitalisation is fair and reasonable having regard to the interests of holders of securities, in the absence of a superior alternative proposal.”

Businesswire.co.nz

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