Macquarie Airports securities fell to new five year lows yesterday after it revealed a recapitalisation for Sydney Airport and change in its distribution policy to try and arrest the slide.
It has effectively joined with other shareholders in Sydney Airport to pump in more than $800 million in new capital so the business can meet debt repayments.
Map’s share will be $630 million alone. It reports its latest financial results tomorrow, but has already warned of slowing traffic this half in Europe and at Sydney.
The market price of the stapled securities have slid from a high of around $4.60 in late 2007, to yesterday’s low point of $1.635. They closed at $1.655.
The global credit crunch, recession and slump in the airline business, plus the intense unease investors have for highly geared investments now (and especially those associated with Macquarie Bank/Group has) have been the drivers for the tanking market price.
Macquarie’s price, like many of the satellites in the empire, have fallen sharply as well exceeding the overall market drop in most cases).
Still it hasn’t been belted as low by the market as those in the Babcock and Brown empire, or some in the property sector, such as GPT, Mirvac and Centro.
In a statement to the ASX Macquarie said:
"Sydney Airport’s shareholders have proactively decided to strengthen the balance sheet of the airport and replace the tranches of debt maturing this year with equity.
"This will enable the airport’s management to focus on delivering the key growth and service initiatives planned at the airport.
"The total shareholder contribution is sufficient to ensure the A$870m in term debt maturing at the end of 2009 is fully extinguished.
"It is expected that MAp will make its full pro rata contribution. This will be funded entirely from its existing cash reserves of A$1.4bn."
.It also cancelled a buyback.
Map has an effective total 72.1% stake in Sydney Airport, through a portfolio that includes interests in airports in the UK and Europe.
Under the plan, Sydney Airport shareholders will invest equity to repay $870 million in term debt maturing in September and November of 2009.
"The equity contributions will be received by the company in sufficient time to repay the facilities well ahead of their maturity at the end of the year," chief executive Kerrie Mather said in the statement.
Once the debt is repaid, Sydney Airport will have no further term debt due until September 2011 and its pro-forma net senior debt will be about $4.5 billion.
Map said its full pro-rata contribution to the plan to strengthen the airport’s balance sheet will be funded from cash reserves of $1.4 billion. These were built up when it sold small stakes in some of its European airports last year to unlisted Macquarie funds for $1.5 billion.
Map said that it will have cash of more than $500 million after the injection into Sydney Airport and will also stop its current buyback program for up to $1 billion of securities that began in November.
"Once the Sydney Airport contribution has completed, Map will re-evaluate the uses for its remaining surplus cash balance," Ms Mather said.
"Our proactive approach means that we are in a position to announce preliminary distribution guidance for 2009 of 27 cents per stapled security."
Map has already announced its total distribution for 2008 will be 27 cents, including a final distribution of 14 cents.
"Cancelling the buyback was not an easy decision, but we believe that the actions we have outlined today ensure that Map and its airport businesses remain well-placed for the current external environment and are in the best interests of security holders."
Sydney Airport’s other stakeholders include Ontario Teachers Pension Plan, Sydney Airport Intervest GmBH, Hochtief AirPort GmBH, MTAA, UniSuper and Colonial First State Infrastructure & Utilities Fund.
