Greiner sees healthy Cross City Tunnel appetite

The former Infrastructure NSW chairman expects the cash-flow positive asset to appeal to investors.

Nick Greiner, the former Infrastructure New South Wales chairman, expects Sydney’s Cross City Tunnel to be snapped up by infrastructure investors because it is cash-flow positive, traffic flows have stabilised and the tunnel was only sent into voluntary administration by a legal dispute.

“There’s a lot of appetite for an asset such as the Cross City Tunnel,” Greiner, a former state premier, told DataRoom. “Patronage risk has been removed as traffic volumes have settled.”

Transurban Group, owner of five motorways in Sydney, is seen as the logical buyer of Cross City Tunnel, say infrastructure investors.  Transurban may be able to integrate Cross City Tunnel into its existing assets and leverage the reduced costs and higher cash flow to pay a better price than rivals. Cross City Tunnel declined comment while Transurban did not return a call seeking comment.

About 250,000 vehicles a week use the Cross City Tunnel, a 2.1 kilometre long roadway that links Sydney’s western and eastern suburbs. It is cash-flow positive but went into administration last week after the NSW Office of State Revenue said it intends to appeal a Supreme Court decision which affirmed that $64 million in stamp duty was not payable on the 2007 acquisition. 

“The legal action has had significant impact coming in the midst of required refinancing,” Ed Sandrejko, chairman of Cross City Tunnel, said last week.

Greiner doesn’t think the NSW government will buy the tunnel, which has an estimated value between $500 million and $600 million. That compares with a price tag of $700 million paid by RBS Group, Eiser Infrastructure Partners LLP and Leighton Holdings Ltd. for the asset in 2007,  after it first went into receivership in 2006. 

RBS, which declined comment, owns 100 per cent of Cross City Tunnel’s debt of about $600 million, according to fixed income desks at investment banks. Traders say there is little likelihood the debt will trade and expect Cross City Tunnel to be sold.

Cross City Tunnel joins a list of other Australian motorways that include Brisbane’s RiverCity Motorway Group and BrisConnections. Final bids for RiverCity are expected on Monday, with those in the running pegged as Queensland Motorways, UBS Infrastructure, Spain's Abertis Infraestructuras and Globalvia, Melbourne-based superannuation fund REST Industry Super, and  infrastructure fund manager CP2 partnered with Spain's Cintra.

Infrastructure NSW was formed in July 2011 with a brief to identify and prioritise required upgrades. Greiner departed the post of Chairman in July.