Last month provided another reminder of the difficulties plaguing listed infrastructure. On 14 April, the New York Stock Exchange(NYSE) notified Macquarie Infrastructure Company (MIC) that its market value has fallen below the minimum required to remain listed — at least $75 million over a consecutive 30 day period. On 7 April, MIC’s 30-day average was around $65.3 million.
The Macquarie-managed infra firm now has 45 days to say how it plans to meet the listing standard. Like many of Macquarie’s other listed infrastructure funds, MIC’s shares have tumbled in the wake of the financial crisis – down 42 percent since the beginning of the year and 95 percent from their June 2007 peak.
This is a big headache for Macquarie.The Sydney-based investment bank co-invests in its managed investments off of its balance sheets. Such investments have been at the forefront of the near-A$2 billion (e1.1 billion; $1.4 billion) in write downs and impairments the firm announced for its latest fiscal year. In early March, they also prompted speculation that the firm would need to raise capital amid mounting fund losses.
Macquarie denies this, and says it has no plans for further capital raising. It also announced that the funds, which provide only about 5 percent of its operating income, are trying to boost their share prices through stock buybacks, debt reduction and privatisation proposals.
About a month later, we saw the first of these pan out. On 31 March, the Canada Pension Plan Investment Board bid A$1.37 billion in cash for Sydney-listed Macquarie Communications Infrastructure Group – a 67 percent premium on its share price. The deal still needs shareholder approval, but if successful it could provide Macquarie a good model for offloading its once-powerful fee machines.
For its part, MIC seems intent on staying listed. It plans to boost its share value by slashing debt and cutting operating expenses across its businesses. “We believe the price of our shares… overstates the impact of the market conditions,” Peter Stokes, MIC’s chief executive, told investors. It remains to be seen if investors will buy that.