Toll concession investors lobby for leveraging stimulus-$s

January 21, 2009
By Peter Samuel

Investor groups interested in tollroad concessions are putting their pitch in Washington DC for equity to play a major role in reviving the economy. They say $180 billion is available that could generate between 600k and 2m jobs in the US. The effort is coordinated by Kearsarge Global Advisors and includes Abertis, Babcock & Brown, Barclays Capital, Chadbourne & Parke, Citi Infrastructures, Credit Suisse, Debevoise & Plimpton, Freshfields Bruckhaus Deringer, Fulbright & Jaworski, McKenna Long & Aldridge, Merrill Lynch, Morgan Stanley, RBC Capital Markets, Scotia Capital, RREEF, and UBS.

A presentation was made in a telephone conference call this morning involving John Schmidt of Mayer Brown, Rob Collins of Morgan Stanley and Kent Rowley of Freshfields Brickhaus.

A powerpoint style presentation (link at bottom) shows the arguments the group is using. They say that there are over 30 infrastructure funds with about $180b ready to invest and that the amount will grow "substantially" if federal and state governments show an interest in tapping it. The initial $180b, theya rgue, can support up to $450b with borrowings, depending on the leverage ratios of debt to equity.

The group says that the US is considered a safe and stable place to invest and that capital will flow "if it is welcome."

However if stimulus money is used to fund projects in their entirely the equity funds will go elsewhere.

If projects with equity potential are funded with government stimulus funds it will "displace private capital" and it will subsequently take several years to develop a "replacement roster of economically attractive projects."

The group is arguing for:

- tying stimulus funds to private capital involvement

- expanding P3 opportunities in interstate tolling

- creating a national standard for P3s

- increasing capital and flexibility for PABs (private activity bonds) and TIFIA

- exemption of PABs from alternative minimum tax

- national infrastructure bank

- facilitate a AAA/Aaa bond guarantor for infrastructure

Part of their pitch is that P3s can limit the extent of public debt taken on and allow private investors to assume some of the risks of infrastructure investment.

Presentation: http://www.tollroadsnews.com/sites/default/files/Kearsarge.pdf

TOLLROADSnews 2009-01-21

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