Olive branch for BBI exchangeable preference shareholders

$1.8 billion recapitalisation deal gets over the line.

Some EPS holders, led by Sydney's Bronte Capital, had complained that their security over the former Alinta assets now known as the Australian Energy Transmission & Distribution division meant it might be possible for them to receive a higher return from administration than the 43? on offer under the recapitalisation deal.

After plenty of letters were exchanged between lawyers, BBI, Brookfield and the lenders agreed to offer any proceeds from the eventual sale of the AET&D business to be returned to the EPS holders, excluding transaction costs.

In the view of BBI and an independent expert, Grant Samuel, granting this concession to the EPS holders could be an academic exercise, as they value the AET&D assets below the amount of debt held by the business.

Brookfield's decision to agree to the gesture would appear to indicate the Canadian infrastructure group takes a similar view, but it nevertheless represents an olive branch to disgruntled EPS holders.

The EPS holders were last night busy digesting the revised agreement, so it was unclear whether it had settled all their concerns about the recapitalisation proposal.

As part of the deal, RMG Partners, an independent advisory group, will help implement the arrangements.

Grant Samuel has already opined that the revised deal is "fair and reasonable" and it is not expected to delay an investor vote set for November 16. The deal, which will rechristen BBI as Prime Infrastructure, requires the approval of shareholders and EPS holders.

BBI shares closed at 3.5? yesterday, below the proposed 4? cash return to shareholders under the deal with Brookfield, while EPS units closed at 35.5?.

Listings parade

NOW that Myer has finally completed the pricing for its $2.4 billion float and private equity groups TPG and Blum Capital have decided to exit completely the market will naturally focus on the implications for its initial trading and for other coming retail listings.

Myer will start trading on Monday the start of a week in which the Reserve Bank of Australia is expected to increase interest rates by at least 25 basis points and rival David Jones will release its quarterly sales results.

The following week, Kathmandu will undertake the institutional book-build for its own float. It will be interesting to see the response. The Myer float was priced at the bottom end of its range, on an earnings multiple of about 15.1 times, whereas for Kathmandu the same ratio would represent the top end of the pricing range.

DJs is now trading at a multiple of 16.6, its share price having slipped 4 per cent since Myer released its prospectus last month.

It is believed that the private equity owners of Myer decided to sell their entire stake in the float because of a combination of investor preference and enough demand in what will be the largest retail float since Woolworths raised

$2.5 billion in 1993.

It will be interesting to see whether Kathmandu's owners, Goldman Sachs JBWere and Quadrant Private Equity, make the same decision.

In the case of Myer, the register will be nearly equally made up of retail shareholders and institutions, both parts being scaled back as part of the final pricing at $4.10.

In the meantime, a report that Archer Capital-owned Ascendia Retail to be renamed Rebel Group after an expected float was seeking a new $200 million debt facility was believed to be off the mark. As a standard part of its preparation for a float, Ascendia will need to arrange a new debt facility, but it is not believed to have started that process yet. Its offering is still believed to be unlikely to occur until next year.

Elsewhere, the odds of Pacific Equity Partners deciding to float book retailer Redgroup Retail early in the new year seem to have shortened.

PEP has yet to appoint investment bankers to advise on the process, but Redgroup's financial results released yesterday were encouraging.

Redgroup, which owns the local arm of Borders and Angus & Robertson, reported earnings before interest, tax, depreciation and amortisation of $42.4 million, up from $14.1 million the previous year. The 2008 figure had not included the Borders acquisition.

Linc lacks energy

THE fact that plenty of Indian and Chinese companies are sniffing around the coal sector for acquisitions does not seem to have sped up the sales process for Linc Energy's Queensland coal deposits.

Most in the industry don't deem them to be of top-tier quality, which means the large global miners are likely to stay away from the sales process, run by UBS. And Indian companies in particular are becoming notorious in the local market for being very slow movers, leaving investment bankers wringing their hands in frustration.

The tenements for sale Emerald, Galilee and Pentland will take years to develop. In particular, the Galilee Basin home to rival projects controlled by billionaires Clive Palmer and Gina Rinehart lacks the necessary rail and port infrastructure.

Earlier agreements to sell the Emerald deposit to Xinwen Mining for $1.5 billion and then all three to Felix Resources' suitor, Yanzhou Coal, for an undisclosed price both fell over. It remains to be seen whether Linc can collect $1.5 billion or more this time around.

Meanwhile, Palmer's $US3 billion or so float of his mining assets in Hong Kong also seems to be moving more slowly than some anticipated. The vehicle, Resourcehouse, passed its listing hearing, but lead managers Macquarie Capital and UBS are still working on the prospectus and have yet to start marketing.

jfreed@fairfaxmedia.com.au

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