Familiar connections with toll-road projects

ConnectEast, which operates the EastLink toll road, has downgraded traffic numbers and announced a $400 million write-down of the road's value. That was followed by news of a $531 million annual loss, and a capital raising to help pay off debt.

It's a long way from the upbeat times of October 2004, when ConnectEast offered 1.12 billion stapled units to investors on the promise of lucrative tolling revenue and strong traffic flows.

Neither has materialised.

The "traffic expert" that did the initial forecasts for EastLink was Hyder Consulting. The revised numbers for EastLink have been prepared by a company called IMIS. BrisConnections commissioned a company called Arup as its traffic expert, but will not release the data to the public.

Fears over traffic aside, it's hard not to note the other similarities between ConnectEast, which built EastLink, and BrisConnections, which is building Airport Link.

Both deals were put together by Macquarie Group, which raked in tens of millions of dollars in fees.

Thiess John Holland, a subsidiary of listed Leighton Holdings, won the right to build both projects.

Ray Wilson, managing director of BrisConnections, was a director of ConnectEast until late last year.

EastLink project director Gordon Ralph is now project director of Airport Link.

Full Disclosure also notes that one of the lead managers of the ConnectEast float was Rothschild Australia the company chaired by Trevor Rowe, who is chairman of BrisConnections.

Given the woes that have beset ConnectEast, a few at BrisConnections will be hoping that's where the similarities stop.

Cliche for ConnectEast

AMONG the flurry of news from ConnectEast, Full Disclosure noted that the new chief executive of the company is Dennis Cliche the former boss of Yarra Trams for the past four years.

Maybe the surname prompted both ConnectEast chairman Tony Shepherd and departing boss John Gardiner to commend Cliche's "impressive track record" and his "good network" in the transport game.

Mr 0.1 per cent's move

NICHOLAS Bolton is pondering just what to do with his latest investment. Bolton is the 27-year-old with a penchant for partly paid shares that cost 0.1? each the lowest price allowed by the Australian Securities Exchange. He bought 19.7 per cent of BrisConnections at 0.1? a share this year, and now holds 19.9 per cent of listed Multiplex Prime Property Trust, which is trading at 0.1? and is in breach of its banking covenants.

Multiplex Prime, managed by Brookfield Multiplex, owns commercial properties in Sydney and Melbourne, and has seen the values of those assets collapse in the past year.

Bolton paid $56,000 for 56 million Multiplex Prime units, which have a 40? a unit instalment due in 2011. That means he owes the company $22.4 million down the track.

Brookfield Multiplex, along with advisers at Macquarie Capital, have come up with a solution to keep banks happy and combat the Bolton threat a rights issue to raise $50 million from existing investors, who will be offered a chance to buy 178 units for every unit they own at a price of 0.1? each.

The instalment payment will fall from 40? a unit to just 2.224? a unit on the new total, payable under the same terms in June 2011.

The deal means Bolton will have to stump up $10 million to maintain his stake in the company, or be diluted. If he takes up the deal, he will still be liable to pay the $22.4 million in 2011.

Multiplex Prime has even included a "Bolton clause" in the deal a "cash-out facility" to buy back units at 0.1? each that has been offered to anyone who doesn't want to take part in the capital raising.

The deal is underwritten by Brookfield Multiplex, and the banks will hold off making the next call, but Bolton wonders if unit holders will want to pay 178 times the value of their investment to maintain their stake in the company, especially as Multiplex Prime has 15? a unit of net tangible assets (NTA) if it were to be liquidated.

"If the underwritten value were closer to the NTA, we would be happier," Bolton said.