road to riches, page-13

Toll roads operate on the basis of large scale long term debt. This generally enables arrangement of low interest rates. Revenue generated is supposed to be stable and continuously increasing so that these companies were regarded as secure low risk investments. The GFC was a severe test and, contrary to expectation, traffic did decrease significantly, and revenue suffered far more than anticipated. The optimistic model had to be somewhat modified. Distributions were reduced.

It must have been a face saving operation that forced MQG to continue with the management of Bad MIG.

MQA paid no distributions for three years and only commenced payments in March 2013 (2.4c, 3.3c, 5.0c, 8.2c HYs). However the share price gains have been significant: from an initial 55c (?) to $3.30 this mid year and then a minor retreat recently on news of European economic deteriorations. It is important to look closely at the regular traffic figures which thus far have been showing smallish increases. The next two quarters should be watched carefully as indicators.

One oddity seems to be that when a particular toll road is no longer self supporting management can just hand it over to the money lenders without further responsibility. The M6Toll is one such example and MQA now gets a fixed fee for continuing management of the road.

Juke