CP2: ‘BrisConnections has a flawed structure and bid model’(2)

Infrastructure investor CP2 says it warned about BrisConnections’ flaws three years ago, after last week around 75% of the firm’s shareholders defaulted on a capital call.

BrisConnections, the company running a 45-year concession to construct and maintain a Brisbane airport link road, has been criticised by Australian infrastructure investment manager CP2 as having a poor structure and a flawed bidding model.
The firm said that the structure of the BrisConnections project was “wrong” because it involved “high gearing and partly paid securities”. It also said that its bidding system “created a conflict of interest between the long-term sustainability of the bid company and the incentive to win the bid,” because investment banks take large upfront fees as well as ongoing fee streams, and bid costs are high.
It said that although the underlying project is “fundamentally a good one”, the structures were formed and accepted by investors during “expansionary times”, when CP2 managing director Peter Doherty warned in 2006 that these structures “may be found wanting under stress”.
Last week nearly 75 percent of BrisConnections’ shareholders defaulted on a A$1 (€0.5; $0.7) per share capital call, due 29 April. Shareholders coughed up just A$102 million of an expected A$390 million.