The Livable Blog

If you are wondering why investors are reluctant to throw down $2.3 billion to finance the Port Mann / Highway 1 portion of Gateway, check out what the Australian business media has to say about a 2008 Macquarie offering:

"The yet-to-be-built Brisbane toll road project was possibly the most disastrous sharemarket listing since the Romans decided to build a road network more than 2000 years ago."

"Brisconnections, the yet-to-be-built Brisbane toll road, has become the butt of jokes in the finance sector given the security price of its first instalment has fallen from $1 to 0.1c."

OK, I want to invest $500 million in the next one!:)

Like Enron and the US investment banks before, Macquarie's business model seems to be unraveling. And the public purse is where the corporations go for handouts when their Ponzi schemes unravel.

My understanding of the Macquarie model is that they arranged P3s and then inflated the value of the projects, before repackaging them into complex investment packages so investors would buy without an independent assessment of the asset value. This is basically the same problem as with sub-prime mortgages in the US.

Despite a government bailout in the form of loan guarantees, Macquarie is unloading assets to it's own funds, or funds run by close associates, in a seemingly desperate juggling act.

"QIC has a close relationship with Macquarie. Its chairman, Trevor Rowe, also chairs the Macquarie-listed Brisconnections, of which QIC is the largest institutional shareholder.

The purchase price is well above the value implied by Transurban and MIG's buy-out of contractor Leighton's 5 per cent stake in the road last August. Each paid $38 million for a 2.5 per cent stake in the road, implying a $760 million valuation on MIG's stake.

This was before the meltdown in financial markets. In late 2005, during the infrastructure boom, MIG increased its stake in the road by 5 per cent for $47.4 million, implying a $474 million valuation for a half-stake."

Maybe my analysis is simplistic, but this does not inspire a lot of confidence.

The bright side is that Macquarie's meltdown may go a long way to prevent the meltdown of Greenland's ice sheet (Which would submerge much of the route of the proposed Gateway Freeways), if it helps stop the global freeway building binge.

The biggest losers (and a few winners, too)
January 3, 2009 - 9:11AM

In the pantheon of financial performances, 2008 was an absolute stand-out for all the wrong reasons. Scott Rochfort looks at those companies which had a year to forget and may be forgotten as a result.

[snip]

BRISCONNECTIONS The yet-to-be-built Brisbane toll road project was possibly the most disastrous sharemarket listing since the Romans decided to build a road network more than 2000 years ago.

Listed by Macquarie Group at $1 each - in the first of three tranches - securities in the toll-road (dubbed Brisbane's Missing Link by its spruikers) slumped to 0.1 cents by year's end.

The slump at least provided a Melbourne housewife, Fang He, the chance to make a mark in the corporate world. She snapped up 8.26 per cent of Brisconnections, or 32.3 million shares, for a cool $32,300. It was unclear if she was aware her investment obliged her to fork out a further $65 million for the next two $1 instalments in the company.

"I am only a housewife. My husband is running this business in my name," Mrs He explained to the Herald in November. But it seems she wasn't too keen on forking out the extra $65 million, given she sold her stake weeks later.

In December, the Brisconnections chairman, Trevor Rowe, made the understatement of the year. "Your directors acknowledge that, in the current adverse global financial environment, the price performance of our stapled units has been disappointing," he said in a letter to Brisconnections victims (aka securityholders).
[snip]

Full text http://www.brisbanetimes.com.au/news/business/the-biggest-losers-and-a-few-winners-too/2009/01/03/1230681789600.html

Keep the balls in the air Macquarie!

Price 'too high' for half stake in M7
Scott Rochfort
January 14, 2009

TRANSURBAN has called Macquarie Infrastructure Group's bluff by declining to buy a 50 per cent equity stake in Sydney's Westlink M7 motorway, leaving MIG with a deal to sell the stake back into one of its own investment vehicles.

Last month MIG announced plans to sell its stake to the Western Sydney Road Group (WSRG) for $805 million, placing a 30-day deadline on Transurban to decide whether it would exercise its pre-emptive right to buy-out its M7 co-owner.

But yesterday Transurban's chief executive, Chris Lynch, said the price tag was too high.

"Any acquisition of additional equity in the Westlink M7 at the price created by the formation of WSRG would not have been value creative for Transurban security holders given the funding options in the current market," he said in a statement.

Transurban was rewarded for deciding not to buy the stake - its shares rose 22c to $5.17. MIG shares rose 0.5c to $1.72.

The deal comes as MIG's manager, Macquarie Group, is undertaking a major cost-cutting and asset sale program to strengthen its balance sheet.

MIG will now proceed with the sale to WSRG, a vehicle jointly owned by itself and a fund managed by Queensland Investment Corporation's Infrastructure investment arm.

This will result in QIC paying $402.5 million to MIG for a half-stake in WSRG. It will leave MIG with about $950 million of cash on its balance sheet after it pays its half-year 10c per security distribution on February 13.

It is expected MIG will also use the cash to buy back shares. It has bought back about 89 million or 4 per cent. Some observers suspect the buyback could be the first step in Macquarie trying to reprivatise the fund.

MIG also said it planned to "continue discussions with third parties" over the sale of its stake in WSRG.

QIC said it was "delighted" to acquire a 25 per cent indirect stake in the M7. "The purchase price is at a 5 per cent discount to MIG directors' valuation at 30 June, 2008, for an equivalent direct investment," said a QIC partner, Matina Papathanasiou.

QIC has a close relationship with Macquarie. Its chairman, Trevor Rowe, also chairs the Macquarie-listed Brisconnections, of which QIC is the largest institutional shareholder.

The purchase price is well above the value implied by Transurban and MIG's buy-out of contractor Leighton's 5 per cent stake in the road last August. Each paid $38 million for a 2.5 per cent stake in the road, implying a $760 million valuation on MIG's stake.

This was before the meltdown in financial markets. In late 2005, during the infrastructure boom, MIG increased its stake in the road by 5 per cent for $47.4 million, implying a $474 million valuation for a half-stake.

Brisconnections, the yet-to-be-built Brisbane toll road, has become the butt of jokes in the finance sector given the security price of its first instalment has fallen from $1 to 0.1c.

The fall in Brisconnections has fuelled concerns the toll road will struggle to raise the further $816 million due from its next two security instalments. Macquarie and Deutsche Bank will underwrite the next two instalments if Brisconnections cannot get its security holders to trump up the extra cash.
http://business.smh.com.au/business/price-too-high-for-half-stake-in-m7-20090113-7g2p.html