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Macquarie signals huge losses day after P3 mega-bridge announced
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by mike_yvr | February 6, 2009 at 06:19 am
2440 views | 18 Recommendations | 3 comments
Just a day after the B.C. Liberal government announced plans to supersize the new Port Mann bridge crossing comes news that the project's private partner is facing major write-downs on its other infrastructure funds and equity investments.
In an operating update released Thursday in Australia, Macquarie Groupsaid that it faces potential losses of AUD$1.5 billion (about CAD$1.2 billion) on these funds and investments -- more than double the losses it had forecast just a few months ago.
The B.C. government announced a day earlier that it would pony up $1.15 billion to shore up the Macquarie-led public-private partnership (P3) that's financing, building and maintaining the new Port Mann toll-bridge for the next three decades.
Last month, Macquarie Group failed to meet its deadline for closing off the financial arrangement for the Port Mann P3 after failing to secure the necessary credit for the project. The provincial government provided Macquarie with a one-month extension to complete the financing.
But on January 28, the government bailed out the P3 with a guarantee for one-third of the financing for the deal -- a share estimated at $750 million. By Wednesday, that contribution to the credit-starved Macquarie Group and its partners had risen to $1.15 billion.
The new scheme for the Port Mann toll bridge scraps the previous plan to twin the existing bridge and replace it with a new ten-lane span at a cost of $3.3 billion.
Banks are expected to match B.C. taxpayers financing with the Macquaire-led consortium securing the $1 billion balance with its own equity.
Macquarie Group has significant investments in toll highways that have been written down from AUD$10.2 billion (about CAD$8.2 billion) to just AUD$6.5 billion (CAD$5.2 billion) the past year.
MACQUARIE Group is losing hundreds of millions of dollars on investments in its own funds.
The diversified investment bank, which yesterday confirmed it had sacked more than 1000 staff in the past four months, will take a $2 billion hit, one of the largest ever, on bad loans and poor assets as the global financial crisis ravages its fortunes.
The worst of the write-downs will centre on Macquarie's investment in its own listed infrastructure funds, which have been smashed by the current market turmoil.
Macquarie had expected to lose $680 million on the funds, and broader equity investments, but the potential loss has now more than doubled to $1.5 billion in a number of months.
A HORROR operating update from Macquarie Group yesterday fuelled concerns the company's stable of listed real estate and infrastructure satellites could soon report larger than expected write-downs to their asset portfolios.
Following Macquarie's warning that the "unprecedented market conditions" made it extremely difficult to forecast the coming year, securities in the toll-road group Macquarie Infrastructure fell 7.5c to $1.29, their lowest close since 2000.
In response to an ASX price query later in the afternoon, MIG reiterated the warning given in mid-December that it expected to write down its toll-road portfolio from $8.6 billion to $6.5 billion. This is well down from the $10.2 billion it valued its assets at the start of 2008 - which include stakes in the Indiana Toll Road, France's APRR, Britain's M6, Toronto's ETR 407 and Sydney's M7.
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Most RecentMost Recommended Comments (3)
at 09:56 on February 6th, 2009
this is just a bad idea from the start - this just doesn't have any high points at this time.
at 09:10 on February 6th, 2009
This is a really big deal for British Columbians and an excellent example of ideology gone wild. None of the arguments for using a public-private partnership model hold when taxpayers are underwriting the deal. There's no 'value for money' here and 'risk transfer' is non-existent. This is only the beginning of this P3 nightmare. We have 30 plus years and endless toll increases to go yet.
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fantomdesignsat 20:25 on February 6th, 2009
Another well thought out plan by our government. So now they are looking at bailing out the company that's supposed to lead this project with our tax dollars, so we pay for it once there, then of course they'll put a toll on it so we pay there too. Before the end of the project they'll realize that it went over budget (like it always does) and we'll get screwed with that cost too. Why is it that the working man keeps paying for the job justification projects these geniuses keep coming up with? In the end, just like the raise in fuel costs, this will hurt the smaller businesses and the middle class the most. Think of how many trades guys that need their vehicles have to go across that bridge daily. I'm getting a sea-doo.