Transurban reaches financial close on Lane Cove

Three banks have provided Transurban with a three-year, A$260m non-recourse debt facility to finance its acquisition of Australia’s Lane Cove Tunnel, which the toll road operator acquired for A$630m in May.

Australian listed toll road operator Transurban has reached financial close on its acquisition of Sydney’s Lane Cove Tunnel with the backing of three banks.

The Australian and New Zealand Banking Group, the Bank of Tokyo-Mitsubishi and Westpac Banking Corporation have provided Transurban with A$260 million (€180 million; $237 million) of non-recourse debt with a maturity of three years. The rest of the transaction will be financed with the equity proceeds of a recent capital raising.

Lane Cove: Three banks
back Transurban

Without disclosing figures, Transurban chief financial officer Tom Honan said the pricing on the three-year facility reflects “a continuing improvement in borrowing conditions”. He added that the facility’s short term “reflects the immaturity of the Lane Cove asset compared to other toll roads in Transurban’s portfolio”.

Transurban bought Lane Cove for A$630 million in May from a consortium of Leighton Holdings, Mirvac and Cheung Kong Infrastructure after the latter failed to fully repay interest on about A$1.16 billion in debt earlier this year.

The purchase price represents more than 28x the asset’s 2009 earnings before interest, tax, depreciation and amortisation (EBITDA) and represents a discount of almost A$1 billion to the price paid by the original project sponsors three years ago. The road will allow synergies with Transurban’s M2, a Sydney road adjacent to it.

The collapse of Lane Cove – which includes a 3.6 kilometre twin-tunnel tolled motorway and two tolled ramps – has been blamed on wildly inaccurate traffic projections which have seen the road underperform practically since it opened in March 2007.

Original traffic expectations pointed to daily traffic in the region of 100,000 vehicles but Lane Cove had been averaging half that amount. A traffic high of over 62,000 vehicles was reached last November. But that number still compares unfavourably with the 134,000 vehicles per day expected in 2011, according to the original estimates.