Macquarie increases stake in French road

Macquarie Atlas Roads (MQA) – one of the spinouts from the Macquarie Infrastructure Group – together with French developer Eiffage has acquired an extra 13.7 percent stake in road network APRR.

APRR operates over 2,200 kilometres of road across France. The majority of APRR is owned by Eiffarie (81.48 percent), a vehicle jointly owned by Eiffage (50 percent plus one share) and Macquarie (50 percent minus one share) through MQA.

The stake was acquired from funds managed by investors Elliot Managment Corporation and Sandell Asset Management Corporation for €55 per share or close to €854 million. MQA will fund the purchase with €155 million from its own funds with the balance coming from Macquarie Infrastructure Fund II and Eiffage, MQA said in a statement.

The new acquisition brings MQA and Eiffage’s stake in APRR to 95.21 percent. But the partners are not intending to stop there and are making a bid for full ownership via a repurchase offer for the remaining shares in APRR, to be launched once this acquisition reaches financial close on June 23. The repurchase offer will price shares at the ex-dividend price of €54.16 per security.

Once Eiffarie acquires full control of APRR, MQA would hold an estimated 19.2 percent of the joint venture, with Eiffage owning the remainder.

“The acquisition will be fully equity funded and represents a substantial deleveraging of Eiffarie,” said Peter Trent, chief executive of MQA. “This, together with the additional cash flows resulting from the increased ownership of APRR, significantly improves Eiffarie’s financial strength and positions it well for its refinancing due in 2013,” he added.

The two partners have recently agreed to pay a dividend of €0.84 per share in order to service a forthcoming €80 million debt repayment at the end of June.

However, the two firms had previously been at odds on how to service debt for the road, with Eiffage wanting to do an initial capital increase of €80 million to cover the repayment – a solution Macquarie did not favour. Macquarie has veto power to block a capital increase, which can dilute its position in the toll road vehicle.

 Jean-François Roverato, Eiffage’s chief executive, had previously defended the need for the equity injection in light of ratings agencies’ tougher rules on servicing debt in the aftermath of the financial crisis:

“Macquarie views the flow of finances in one direction – from the infrastructure to the investment fund. We think the pumps work both ways,” Roverato told French newspaper Le Figaro earlier this year. In the long term, he estimates that up to €320 million in equity will have to be injected in the toll road vehicle to meet its debt covenants.

APRR is rated Baa3 by Moody’s with a stable outlook while S&P’s rates it at BBB – with the rating on negative watch. Its net profits in 2009 rose by 12 percent to €349 million and it currently has over €11 billion in debt.