bam incentive for aetd asset sales, page-8

Duet Group who are already partners in AETD with Singapore Power, is the most likely buyer of the AETD assets except the Tas Gas network which is most likely to go to BAM. Duet Group are managed by AMP and guess who else ?? MQC.

Gottliebsen of Business Spectator fame ran a tiny article a few weeks ago suggesting Duet needed to raise 368m to take AETD off Babcocks hands. It now looks as though this will occur, see the last paragraph of the SMH article.

BAM and AMP are becoming partners in a new fund including Aust Govt. and Singapore Govt. to buy Australian infrastructure, how very very very coincidental....

Duet are not going to pay prices that dilute it's own earnings elsewhere, see below. This is the cruncher along with the 518m due in 2010.

quote from SMH 23Oct2009
HYBRID HOLDERS WIN ARGUMENT - AND RISK

"The most likely buyer for many of the assets would be DUET Group, in light of its pre-emptive rights over all but the Tasmanian gas pipeline.

Based on consensus analyst estimates for 2010, the ratio of DUET's enterprise value (debt plus equity) to earnings before interest, taxes, depreciation and amortisation is 9.7, while BBI's AET&D assets are 9.4 based only on the value of net debt to EBITDA, assuming there could be no equity remaining. DUET is unlikely to want to cut a deal that would dilute its earnings, so even if it paid 9.7 times for the BBI assets, the remaining equity value in those for EPS holders would be just $56 million."

BAM have decided to end up with the AETD assets one way or another at least for a short term as managers via BBIG PIG, and likely as future partners with AMP/Duet Group.

There are conflicts of interest here that asking BBI investor services to re-arrange anything is not going to change the outcome of towards Beppa via BAM favour in picking up a few extra million in selling commissions.

Bronte and Co are the only force that will have any weight here, and I am sure they already have the above sussed out.

ifandwhen

holding Beppas

also interesting and numbers still relevant....

SMH Jamie Freed 20091012

RIGHTS OF DUET

It appears DUET Group, an oft overlooked infrastructure group jointly managed by Macquarie and AMP, could be a key beneficiary of the proposed recapitalisation of Babcock and Brown International.

All of DUET's Australian assets, including the Dampier Bunbury pipeline in Western Australia, are held in partnership with BBI and Singapore Power, which acquired them through the ill-fated takeover of Alinta.

If BBI's recapitalisation proceeds, it plans to list its interest in those assets as ''held for sale'' and pay its new cornerstone investor, Brookfield Asset Management, $5 million a year to manage them. Brookfield would also get 1 per cent of sale proceeds.

DUET has a pre-emptive right over the gas pipeline, Multinet and WA Gas Networks.

BBI appears confident the transfer of management to Brookfield will not prove an immediate trigger of those rights, although DUET is still looking over the details of the BBI documentation.

However, Brookfield plans to buy the assets itself or sell them to a third party, which will trigger the pre-emptive rights. In addition to DUET, Alcoa would also have a pre-emptive right over the stake in the Dampier Bunbury pipeline, in which it has a 20 per cent interest.

BBI has admitted there is no equity value left in the assets, which it calls the Australian Energy Transmission & Distribution business. It had contributed $1.59 billion of equity to buy AET&D as part of the joint bid for Alinta in 2007 and assumed $1.1 billion of debt over the assets.

BBI has since taken a stunning amount of impairments against AET&D, including $680 million announced in the recapitalisation prospectus last week and $232 million at the time of its results in August.

Based on DUET's valuations, BBI's interest in the assets they co-own would be worth $1.65 billion, which is believed to be about the same amount as the debt against BBI's share of those assets.

Internally, BBI is said to value the Tasmanian pipeline business, in which DUET has no interest at about $200 million.

As for the assets for which DUET has pre-emptive rights, Credit Suisse said the company would be likely to have to contribute about $368 million of equity to buy the assets in order to return the asset-level gearing to appropriate levels.

Credit Suisse said DUET would be likely to need to raise equity to complete such a deal."

suggested further reading is

from 2007

http://www.businessspectator.com.au/bs.nsf/Article/No_harmony_from_Duet_8N64P?OpenDocument&src=srch