Brisbane toll road operator BrisConnections has collapsed into receivership after a syndicate of lenders reportedly rejected a restructure plan for the company, which operates the M7 road in Queensland.
The decision follows a number of disappointing performances among toll road builders, with Clem7, operated by RiverCity, falling into receivership as well two years ago, raising questions about the viability of the toll road model.
PPB Advisory was called in as receiver to the group, with partners David McEvoy, Christopher Hill and Michael Owen appointed. In a statement, McEvoy said the appointment followed the announcement of McGrath Nicol as administrators.
“AirportlinkM7 is a valuable part of Brisbane’s road network and will continue to operate as usual,” he said.
“Our priority is to ensure that normal service is maintained while we work with management and other key stakeholders to implement a sustainable future for the business. We thank the Brisbane public for their continued support and patronage.”
PPB was contacted by SmartCompany this morning, but no other comment was available other than the short statement. ANZ was also contacted, but referred all questions to PPB. However, the bank did tell The Australian the appointment was “not unexpected”.
“We’re comfortable with our provisioning, and there is no change to our provisioning outlook for the year.”
The receivership is not surprising. Traffic through the multi-billion dollar Airport Link road project is tracking at about 50,000 cars per day, well below the 130,000 originally forecast, while the company is holding on to about $3 billion in debt. The road only opened last July.
Problems first appeared in 2010 when Leighton warned of higher than expected costs.
Recently Leighton Holdings wrote down its investment in the $4.8 billion Airport Link toll road last November, although Macquarie Bank increased its investment and now owns 46% of the equity.
BrisConnections holds about $3 billion in bank debt. The company was reported to have put a potential restructure plan to a syndicate of lenders – which includes some offshore companies – asking to delay some interest payments, but that plan was reportedly rejected, triggering the receivership.
The incident is yet another suggestion the toll road market is growing thin. Before the financial crisis a number of major projects were underway, but experts say winning funding for such massive undertakings will now be much harder.
Two years ago, the Clem7 road run by RiverCity was placed in receivership with a debt of $1.3 billion, while the Cross City Tunnel and Lane Cove Tunnel were also placed in receivership in 2006 and 2010 respectively.
Reports indicate the involvement of the Macquarie Group was a sensitive issue regarding the appointment of administrators. Macquarie proposed the project over five years ago, and the fact it bought up more debt in the company late last year has reportedly made some lenders uneasy, according to The Australian Financial Review.
Shares in BrisCon were halted last November at 40 cents.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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