- It was by the leading acquirer of infrastructure in the world (Macquarie Bank).
- It had a private equity type structure –
Macquariedid it on someone else’s balance sheet and ripped out enormous fees.
- An absolutely enormous sum was paid – and was roundly criticised at the time as these 2002 press reports indicate here and here and here and here.
- It was in
Macquarie’s home town (Sydney) and so was super-visible.
- Australian mums and moms and pops were the ultimate holders of the risk – so the high levels of visibility and the bad press mattered,
- It was geared with an amount of debt that meant that the debt holders were taking large (possibly insane) risks for minimal returns (something which is reminiscent of the entire private equity boom).
What is more – the acquisition for about a billion dollars more than the number 2 bidder – was unequivocally a winner. Traffic and hence revenue went up. Funding costs went down and the large amount paid seemed to drop into distant memory.
There is little doubt
… so, about a month later, I arrived at Australia's Sydney Airport - which is owned by a Macquarie fund - during the early-morning rush hour, groggy after a long flight.
If you did the same thing, you might trudge through customs, not noticing much, perhaps, beyond the A$4 - gasp - it costs to hire a luggage trolley. But if you took the time to explore, you would realize that the airport is not a run-of-the-mill ripoff but an eerily efficient moneymaking enterprise.
You don't have to go far out of your way to buy souvenirs or coffee, because the airport's owners have studied how far you'll be willing to deviate from your path (five meters). You might buy a duty-free item not because you want one, but because doing so will shoot you into a special, speedy customs line. And should you drive to the airport, you would discover that parking your car in the shade ("the premium shaded parking product") costs an extra A$4.
Not that all this efficiency lessens the irritation that some users experience. As I shut the door of my cab, the driver begins an unsolicited rant about the fees he has to pay to wait at the airport. "Macquarie Bank owns it," he says. "They own too much."
Macquarie Airports has booked its profit
All of this says that
Given that Macquarie Airports (MAP) has received in cash more than they paid in cash and they can’t be forced to make good
So what is left at
The short answer is a very well run airport and a lot of debt. Here is the balance sheet:
Yes - the shareholder equity is negative nearly half a billion. Tangible shareholder equity over a billion negative.
You can calculate the debt according to your own definition of debt. Maccqaurie picks a lower number because they think the fixed coupon subordinate (the SKIES) are equity. (That is funny given their name: Sydney Kingsford-Smith Income Equity Securities.)
And here is the P&L.
Yes it did lose 182 million last year!
Note in the P&L the operating profit (ie before depreciation) is only 10 million larger than the interest bill. After even basic maintenance capex the airport is cash-flow negative. That is an amazing debt load.
Macqaurie runs lots of its assets this way – though
But the summary is clear:
Is traffic increasing?
Well it has increased every year. But this year is somewhat problematic.
Well the biggest problem now is how well
The fall-off in air-traffic could be temporary. Air traffic has dipped before – but only for short periods. Maybe this will all blow over. If air traffic resumes its historic upward trend then this post should be ignored.
However the oil price hike looks fairly permanent. Does that make it difficult for