The two tranches to come will make BrisCon a $1.2 billion issue but there is a prospect that, unless the stock bounces, investors will be reluctant to throw good money after bad.
If market conditions deteriorate further it could even go to zero with $2 still to pay. “The BrisConnections IPO was fully subscribed with the offer well supported by leading domestic and international institutional investors,” said the press release.
No it wasn’t. There is a monumental overhang of perhaps half the float sitting there waiting to spill.
A miraculous recovery cannot be ruled out. Since investors are required to kick in another $1 in nine months time though, and yet another $1 in 18 months, this one has the ring of the Norwegian Blue parrot about it.
Besides the willingness of the promoters to stuff the overhang into their own vehicles, another measure of the brazen resolve which it took to get this float away was that, during the marketing process, the big toll-road operator Transurban declared a restructure. It would no longer adhere to the model of paying distributions out of capital, said new chief executive Chris Lynch. It was time to deleverage.
Despite Transurban disavowing the model, Macquarie pressed ahead. If the Airport Link project were such an attractive investment proposition the bank, having won the tender, would have slotted the asset into Macquarie Infrastructure Group.
Instead this is a structure designed to produce cash today – $110 million in fees – with unitholders in the BrisCon trust taking the risk on the assets tomorrow. Actual cashflow is years away.
As is de riguer in these offerings, the traffic forecaster charged a king’s ransom for its advice. The expert in question, Arup, snips $4.7 million for making estimates without, one can assume, any liability.
To give Macquarie its due however, although it has structured most of the toll-road deals in the country, the two which have gone belly up thus far for their investors have been Sydney’s Cross City and Lane Cove Tunnel projects – both teed up by other financiers.
While the long-term viability of the other projects will not be known for years, the so-called Macquarie model of listed infrastructure stocks is surely pushing up the daisies – notwithstanding the denials at last week’s shareholder meeting, and the strong inflows into its unlisted vehicles.