connecteast trying to raise $400m

Geoff Easdown

November 21, 2008 12:00am

TOLL roads operator ConnectEast is believed to have struck a red light in its reported attempt to raise up to $400 million in fresh equity.

A plan to announce the rumoured capital raising came unstuck yesterday after the market tumbled 4.3 per cent.

Tom Elliott, managing director of MM&E Capital, told BusinessDaily he had heard reports that ConnectEast directors were close to making a deal that was disrupted by yesterday's market fall.

"The talk was that they had done a deal at 55 before the market collapsed overnight," said Mr Elliott, adding that "the deal might have been pulled" leaving directors to do a deal at a lower price.

ConnectEast has been in a trading halt since Wednesday and last traded at 67.5 - 12.5 above the reported deal at 55.

Yesterday, BusinessDaily was also told that a plan to brief investors was called off and was unlikely to occur until later today at the earliest.

The decision to defer any announcement adds strength to the rumour that yesterday's shares slump had dealt a blow to a share offer.

Other traders, including Shaw Stockbroking's Brent Mitchell, said they believed the trading halt was linked to a need to raise capital to pay down debt.

Mr Elliott suggested the company's level of debt was "too high relative to cash flow" and said "it is almost certainly a capital raising and not a takeover offer".

"They have this commitment to pay out distributions which I think they will slash anyway," he said.

"They have realised they have to raise money while they can and, if they don't, the banks could say that they are going to pull in their loans."

Low traffic volume on the toll road - now about half of what was originally projected - has still to be solved.

"If the actual traffic continues to stay well below the forecast the future does not seem all that bright for the ownership of it," said Mr Elliott.