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MIG splits portfolio, rebrands

Shareholders today green lighted Macquarie Infrastructure Group’s proposal to divide itself into two listed groups separated according to risk profile. Riskier assets will now be held by a new fund called Macquarie Atlas Roads with the more mature ones held by new vehicle Intoll.

A restructuring of Macquarie Infrastructure Group (MIG) has been approved by its shareholders today, allowing it to split into two listed units according to assets’ risk profile.

Intoll: paying dividends from day one
Source: MIG

Under the new structure, MIG’s more mature and less risky assets – including Canada’s 407 ETR highway and Sydney’s Westlink M7 – will be placed in Intoll. The remaining, riskier assets will be place in new vehicle Macquarie Atlas Roads (MQA). These comprise: the UK’s M6 toll road; France’s APRR tolled motorway network; the US’s Chicago Skyway and Indiana Toll Road, both in Chicago; San Diego’s Bay Expressway toll road; Germany’s Warnow Tunnel; and Transtoll, an Australian toll collection provider.

Following the restructuring, MIG shareholders will receive one Intoll and 0.2 MQA securities for each MIG security. But whilst Intoll will pay distributions in line with operating cash flows – and thus continue distributions “from day one”, according to chairman of Macquarie Infrastructure Investment Management (MIIML), Mark Johnson – MQA is unlikely to pay dividends in the next four to five years, he added at the shareholders meeting.
‘Until significant refinancings or restructurings have taken place, the cashflows from the Atlas assets will be insufficient to produce a material dividend to shareholders,’’ Johnson explained. In contrast, “if markets improve and Intoll’s own share price improves, it will have the ability to become part of new projects and to add to its portfolio in much the same way as MIG did at periods in its earlier existence,” he added.
Intoll will become a standalone entity employing its own management team while MQA will be managed by Macquarie under a new agreement and a new fee structure, MIG said in a statement. MIG added it will pay Macquarie A$50 million (€32 million; $45 million) for its services in relation to the restructure. It will also pay Macquarie a one percent advisory fee of A$28.3 million and A$25.6 million for buying management unit MIIML.

MQA: in need of restructuring
Source: MIG

MIG security holders will receive a A$0.10 per security special distribution, MIG said.
The restructuring was the best way to create value for its shareholders, MIG’s directors said in October, and its shareholders have now agreed. Had they failed to separate the assets, MIG would probably find it difficult to generate value, as difficult debt markets changed the outlook for many of the roads now part of MQA.
MIG said it considered other solutions – such as asset sales or a capital raising – but found both had the potential to be value-dilutive. It now values its portfolio at A$5.08 billion as of December 31, 2009 compared with A$5.09 billion in June 2009. The drop in value is the result of appreciation in the Australian dollar, which is eating into revenues from MQA’s roads, MIG said.