Australia's IFM in $5.7b US toll road deal
Australian fund manager IFM Investors has agreed to pay $5.7 billion for a 66-year concession on a US toll road that crosses northern Indiana. It filed for bankruptcy last year due to heavy debts and low traffic volumes.
The investment is being made from the IFM Global Infrastructure Fund, which closed at $2 billion in 2013, with commitments from California State Teachers' Retirement System (CalSTRS), Florida State Board of Administration, Virginia Retirement System and HOSTPLUS, among others. There is likely to be substantial co-investment alongside the fund.
The Indiana Toll road is a 253-kilometer highway that runs from the border of Indiana and Ohio to the Illinois state line near Chicago. It feeds into the Ohio Turnpike in the east and the Chicago Skyway in the west.
Macquarie and Spain-based Cintra - a subsidiary of Ferrovial - paid $3.8 billion for a 75-year concession on the toll road in 2006. The subsequent economic downturn was blamed for declining interstate business and therefore reduced traffic and toll revenue. It entered Chapter 11 bankruptcy proceedings last September and was then put up for sale in an attempt to clear the debt.
Julio Garcia, IFM's head of North American infrastructure, told The Wall Street Journal that the toll road was 85% debt-financed, but under the new deal leverage will fall to around 43%. Creditors on the 2006 transaction are expected to recover $0.95 on the dollar.
"We believe this is a unique opportunity to invest in a high quality US transportation infrastructure asset. IFM Investors views the Indiana Toll Road as an essential operating asset for its strategic geographical position, long concession duration and inflation and GDP-linked tolling regime," Garcia said in a separate statement.
IFM is owned by 30 Australian superannuation funds and had $43 billion in funds under management as of year-end 2014. These LPs participate in IFM's funds and deals but the firm also raises capital from third-party institutions, with US pension funds featuring most prominently.
The firm has offices in New York, London, Berlin and Tokyo, as well as in Melbourne and Sydney. Its international assets include liquefied natural gas, pipeline and electricity assets in North America and water, communication, airport, electricity and water in Europe.
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