MIC walks away from parking business

A pre-packaged bankruptcy sale of the Parking Corporation of America Airports has entered its final chapter, with real estate investor Bainbridge ZKS-Corinthian Holdings agreeing to buy the struggling business for $111.5m. The sale will free Macquarie Infrastructure Company from the business’ $201m debt load.

Macquarie Infrastructure Company (MIC) has agreed to sell its struggling parking business for $111.5 million, striking a deal that allows it to walk away from the heavily indebted asset. Lenders to the company will recover more than half of their principal under a pre-packaged bankruptcy proceeding.

Under the terms of the agreement, the MIC-owned Parking Corporation of America Airports will enter bankruptcy and have its assets purchased out of bankruptcy by real estate investor Bainbridge ZKS-Corinthian Holdings.

Parking: Not on MIC's
balance sheet

The agreed-upon purchase price of $111.5 million will go to the Parking Corporation’s lenders, German banks Dekabank Deutsche Girozentrale and Deutsche Hypothekenbank, who along with a third, subordinated lender are owed $201 million.

The remaining $90 million of debt will be forgiven, resulting in a taxable gain for Macquarie Infrastructure Company. Bainbridge will be taking over the company, which provides off-airport parking at airports across the US, without any liabilities connected to Parking Corporation's legacy debt.

All arrangements are subject to approval by the Delaware bankruptcy court. Other bidders will also have the opportunity to top Bainbridge's price.

If the deal closes as expected in the first half of 2010, it will allow MIC to walk away from a struggling business and free itself from a $201 million debt liability. MIC can do so because the debt, a 2006 credit facility used to refinance the business during better times, does  not allow creditors to lay claim to MIC’s other assets to recover their principal.

For MIC, the agreement signals the final chapter of several months of negotiation, during which executives repeatedly said Parking Corporation’s troubles would be resolved via a pre-packaged bankruptcy.

The business has been a part of MIC’s portfolio ever since the New York Stock Exchange-listed infrastructure fund did an initial public offering in December 2004. At the time, MIC bought Parking Corporation’s predecessor business, Macquarie Parking, for $63.9 million.

Over the next five years, Macquarie grew the business through bolt-on acquisitions and organic growth. But in 2008 Parking Company became a drag on MIC’s results as it struggled with declining revenues due to decreasing air passenger traffic at the 20 major cities in the US where it operates parking.

Realizing it would likely not be able to refinance the company’s $201 million of debt due in 2009, MIC advised it would not invest any more money in the struggling business and went looking for a buyer.

With the parking business off its books, MIC’s portfolio will comprise of three energy-related businesses: a gas utility in Hawaii, a building heating and cooling business in Chicago and a bulk liquid storage terminal operator in the US and Canada. A fourth business, Atlantic Aviation, provides aircraft refueling services at 68 airports and heliports across the US.

Markets were largely non-responsive to yesterday’s announcement of the sale agreement with Bainbridge. MIC shares, which opened at $12.52, ended the day up .9 percent, closing on $12.63.