No parking for $500m in bonds

Chicago Parking Meters, the owner of a 75-year concession on the city’s parking meters, has pulled a planned $500 million bond issue it was hoping to price last week.

A spokesperson for Morgan Stanley Infrastructure Partners, the company’s controlling shareholder, said the bond issue was postponed “due to unfavourable market conditions”.

The spokesperson declined to comment on any specific aspects of market reaction to the bond offering. However, a report in Dow Jones said that prospective bond buyers were insisting that Chicago Parking Meters meet two covenant tests at all times, which Chicago Parking Meters was unwilling to do.

The covenant tests were a requirement to keep an investment-grade rating at all times and a cap on further borrowing in case the company’s earnings before interest, tax and depreciation dipped below a certain level, according to Dow Jones.

Chicago Parking Meters: bond offering postponed

The transaction’s postponement raises questions about how comfortable investors are with the credit risk of parking meter assets, which are a relatively new sub-asset class within infrastructure. Other infrastructure assets, such as toll roads and bridges, have each successfully priced bond deals in the US. But parking meter concessions are just now beginning to come to market and investors may demand a different set of covenants than for toll roads in return for taking on future parking revenue risk.

Last week, Chicago Parking Meters was looking to issue $500 million of 10-year, senior secured bonds.

Morgan Stanley Infrastructure Partners had been hoping to sell the bonds as a way to squeeze out some of the equity in the $1.16 billion transaction, which closed in February 2009. At the time, the deal was capitalised entirely with equity.