NEW YORK (Reuters) – Macquarie Infrastructure Group, which develops and operates toll roads around the world, may divest its holdings in Lusoponte, which owns and operates two toll bridges in Lisbon, Macquarie Chief Executive John Hughes told investors on Monday.
Speaking at a Merrill Lynch conference focused on Australian companies, Hughes said MIG was “exploring options” for the assets in light of the Portuguese government’s recent approval for a third crossing over the Tagus River.
Lusoponte represents about 2 percent of MIG’s portfolio, which the company valued at A$8.57 billion as of June 30.
According to the company’s presentation, Lusoponte’s asset value fell to A$188 million on June 30 from A$217 million a year earlier.
Selling its investment in Lusoponte would be the latest in a series of moves by MIG, which is paring investments and strengthening its balance sheet amid a global downturn in financial markets. MIG is also battling a beaten down share price, which has hindered its ability to acquire new assets, such as the Pennsylvania Turnpike.
“The security price will determine our expansion plans,” Hughes told Reuters in a sideline interview after the presentation. “We’re not de-levering the portfolio. We’re looking to see where mature assets can be sold for value, and we can demonstrate we have good value in our portfolio.”
MIG previously announced plans to divest its 50 percent stake in Westlink M7, a Sydney toll road it jointly owns with Transurban Group (TCL.AX: Quote, Profile, Research, Stock Buzz). That sale is expected to be completed by the end of January.
Macquarie valued its M7 investment at A$802 million at the end of June.
“Hopefully, selling M7 will set some benchmarks and demonstrate the value of our assets,” Hughes said. “The market will determine where our (stock) price really should be.”
Hughes told Reuters that MIG has talked with Transurban about Transurban buying MIG’s stake and how they might execute a deal. Hughes added Transurban has last rights in terms of making an offer.
MIG shares, which closed at A$2.34 in Monday trade, represent a steep discount to the value of its portfolio, which Macquarie reports as A$3.84 a share.
Addressing that discount, MIG last month announced plans to buy back 10 percent of its securities and declared it would pay a distribution of 20 cents per share in 2009. Most other infrastructure and real estate funds have been cutting back their cash distributions.
Hughes acknowledged that a slowing economy in the United States has reduced revenue from some assets – notably its Chicago Skyway and Indiana Toll Road. Traffic on UK’s M6 toll road fell 11 percent in fiscal 2008.
So MIG has been working to reduce costs and boost revenue where it can. Recently in Virginia, were MIG operates the Dulles Greenway, MIG held talks with state officials about amending tolling arrangements, Hughes said.
By Joseph A. Giannone
(Editing by John Wallace)