In today's Herald - (doesn't smell great)Bracing for bad newsTHE...

In today's Herald - (doesn't smell great)

Bracing for bad news

THE market is bracing for "bad news rather than good news" from toll road operator ConnectEast after its securities went into a trading halt yesterday, according to an infrastructure analyst.

Speculation is growing that lower-than-expected traffic numbers on EastLink may prompt the company to cut back its payout from 10.5 to as low as 6.5 per stapled security.

"The reason for the trading halt is mysterious to say the least," a CommSec analyst who declined to be identified, told BusinessDaily.

ConnectEast requested the halt pending an announcement about a proposal it plans to reveal to the market by Monday.

"ConnectEast is concerned that the confidentiality of the subject matter of the announcement may have been breached," it told the Australian Securities Exchange.

Yesterday, a media website published a report saying the toll road operator was seeking to raise more than $350 million in equity after tolls fell short of expectations.

The report did not cite any sources.

EastLink, ConnectEast's only road, was opened to traffic on June 29 and had operated toll-free until July 27.

Last month, ConnectEast told investors at its annual meeting that it had no need to refinance debt for two years and that it had cash reserves of more than $200 million to cover shortfalls in traffic volumes.

But CommSec is speculating that traffic numbers will soften further and may not exceed the crucial 4 per cent month-on-month growth for the remainder of the financial year.

"If traffic comes in below expectations, it will impede on the company's cash flow, getting them into a position where they are in breach of their debt covenant," the analyst said.

"If the leak that prompted the halt had been about a positive development or M & A activity, the stock would have run up before the halt, rather than down.

"So we think we will be hearing bad, not good, news."

ConnectEast stapled securities lost 3 or 4.26 per cent to 67.5 in early session trading