Odd, isn't it, that accounting fiction of loading up an asset next to a liability?
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Ibex Salad regularly updated features...
Monday, October 11, 2010
And our Next Entrant is...
First Ibex 35 component to make its way down the path beaten flat by Ferrovial appears to be the constructor and infrastructure operator, OHL. Press reports this morning have the company studying the possiblity of hiving off its Mexican division - OHL Concesiones. Valued, apparently at 1.6 billion euros, a mooted IPO of about one half would provide 800 million to the noble cause of debt reduction.
Odd, isn't it, that accounting fiction of loading up an asset next to a liability?
----------------------------
Ibex Salad regularly updated features...
Odd, isn't it, that accounting fiction of loading up an asset next to a liability?
----------------------------
Ibex Salad regularly updated features...
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4 Comments:
all this is proving is that there are still suckers out there willing to pay the absurd prices that FER, OHL et al paid for those infrastructure assets oh so many years ago. I would be shocked if Ontario isn't using USD debt at like 2.5% to buy the stake in ETR407 - betting the loonie can't weaken against the dollar and that its reasonable to finance an infinitely lived asset with 10 year paper. Good times. Ask the Del Pino's how that worked out with BAA. History rhyming. What's shocking is that the last bubble was so recent and here we have the same mistakes being made. The blessings for the Spanish guys is that they've now found an even greater bunch of fools to sell their crazy assets to. If FER sells Indiana Toll Road at a gain with inflation running close to zero the world really has gone made.
BTW ETR 407 was a very very early stage infrastructure investment - made just when the Aussies were figuring out the space as a place to invest the superannuation money and before the private equity world at large glommed on to it, so it was always the project that actually was a good deal.
(anonynmous who)
Who - it was a good deal for them. The 407 route had mostly already been laid out and expropriated since the 1960's, the Ontario government was near bankrupt (I get the privilege of living through a second debt bust) and the 14 lanes of the 401 that runs through the middle of Toronto had been obsolete for 15 years.
I don't get much sense that anybody thinks mistakes were actually made, beyond residential real estate lending.
It was a great deal - one of the deals used to justify billions invested in infrastructure - but any deal done after what? 04ish? is unlikely to make sense in the medium term. Nearly all of them (note not ETR407) required constant dividend recaps with huge leverage and consistent revenue inflation and CPI- cost inflation to generate mid singles IRRs. And all of this was predicated on the continued access to the debt capital markets at very attractive real interest rates. Chicago Skyway, ITR, BAA, etc, etc (not trying to pick on FER - Ontario Teachers and MIG have a list of doomed deals as well)
(by early stage I didn't mean ETR 407 the road was early stage, but rather FER did the deal at the early stage of the recent infrastructure madness - imprecise language on my end)
Teachers - poster child for mean reversion if there ever was one.
Good stuff, btw.
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