Saturday, February 21, 2009

"It needs a dramatic lift in revenue for it not to go into financial oblivion."

MIG shrugs off default concerns


Scott Rochfort
The Age (Australia)
Copyright 2009

MACQUARIE Infrastructure Group has played down concerns its part-owned Indiana Toll Road is at risk of defaulting on a $US4.1 billion ($A6.4 billion) debt facility, after revealing cash flows from the road barely covered interest payments in the final months of 2008.

The toll-road operator yesterday said the ITR, which it co-owns with Spain's Cintra, had dipped into $US77.5 million of "stabilisation reserves" to cover debt payments on the road, which suffered a 14.8 per cent slump in traffic volumes in the six months to December 31. "We effectively don't have a default trigger (since) we have that balance of reserves to meet that coverage," said MIG's chief executive John Hughes.

Mr Hughes said MIG had found that even in its "worst case scenario" the reserves would not be exhausted.

The update on the financial state of the road concession purchased from the Indiana State Government in 2006 came as MIG announced a $1.68 billion half-year loss was underlined by heavy write-downs on the value of its toll road portfolio. Perversely, the $1.7 billion asset write-down was seen as the only good news yesterday.

It was less than the $2.1 billion write-down MIG warned of in a December trading update.

MIG shares rose 0.5¢ to $1.35, with revenues for the period falling $20.8 million to $112.4 million, thanks largely to the impact of the economic slowdown on traffic volumes.

Austock infrastructure analyst Andrew Chambers did not share MIG's confidence. "It needs a dramatic lift in revenue for it not to go into financial oblivion," he said.

Investors read the lack of any dividend guidance for next year as a bad sign, given MIG's boasts about extra cash from the recent sale of assets.

In the strongest sign the company's debt-fuelled acquisition binge is over, Mr Hughes said MIG was open to selling more assets.

This follows the sale of its Sydney Westlink M7 stake back to an investment vehicle set up by itself and co-owned by the Queensland Investment Corporation. MIG is looking for a buyer for its remaining half stake.

Mr Hughes stressed MIG would only sell assets if the price was right.

© 2009 The Age:

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