Is there life after Babcock & Brown and after reverting to your old name, if you are Alinta Energy, the heavily indebted energy group based in WA?
Judging by the market reaction to a deal that could resolve the company’s lingering woes and threat of failure, the answer would have to be yes, so long as someone takes a big loss.
Alinta securities jumped 58% at one stage, from 5.8c to 9.2c yesterday after the proposed restructure was revealed in a statement to the ASX.
The units settled back to close at 8.7c, up 50% on the day.
Alinta proposed that it will sell all its operating assets, except its Redbank and Oakey power stations, to its syndicated lenders.
In exchange, the lenders, which include US private equity group TPG and the big four banks, will extinguish the $2.8 billion debt Alinta owes.
Alinta Energy operates under a stapled structure, with each security consisting of one Alinta Limited share and a unit in the Alinta Energy Trust (AET).
Securityholders will be offered 10c per unit under the transaction to destaple the security and transfer the assets to a new company wholly owned by Alinta’s syndicated lenders.
"Once the AET Units are acquired, securityholders will continue to own their AEL Shares which will give them an interest in Redbank Power Station (‘Redbank”). Redbank is fuelled by a mix of coal tailings and mined coal," the company said in yesterday’s statement.
But Redbank is no asset, as Alinta said in the statement: "Given Redbank’s project financing debt levels, recent plant performance issues and trade bid interest, the Directors advise that they do not consider there is any value remaining in Redbank. Consequently there is likely to be no further equity available to securityholders after payment of the 10 cents per security."
And 50% of Oakey is held for sale for the benefit of Babcock & Brown International, which is part of the collapsed former parent.
But with 10c cash on offer, it was no wonder the securities went for a big run yesterday.
But the 10c is a long, long way from the peak value of $3.74 in May 2007, that’s pre-GFC.
Alinta issued yesterday’s statement after talks last weekend and on Monday pushed towards agreement.
Alinta owns stakes in 12 power stations across Australia and New Zealand as well as an energy and gas retailer in Western Australia.
Alinta said a subsidiary would offer to acquire all Alinta Energy units for 10c per unit.
Investment group GPG, owns a 19.9% stake in Alinta. It said yesterday it has provided ‘‘in principle support’’ to the proposed deal.
Alinta warned the proposed deal required ‘‘substantial further work’’ and there was ‘‘risk to execution of the transaction’’.
"The Board will decide what to do with the remainder of the business in due course," the company said yesterday.
