A year after it opened, poor traffic flow has led Moody’s to downgrade the underlying senior secured credit rating of the finance company for the Lane Cove toll tunnel in Sydney, New South Wales.
The credit agency said that the average daily traffic levels in the 3.6km long link during February and March – 62,400 and 59,000, respectively – were well below the base case forecasts made five years ago. It downgraded Lane Cove Tunnel Finance Co’s (LCT) the underlying rating from Ba1 to Baa3, but noted that the Aaa wrapped rating was affirmed.
LCT is the finance company for Connector Motorways Group (CMG), which owns Lane Cove Tunnel and the Falcon Street Gateway. The CMG joint venture comprises Thiess Contractors, John Holland and Dutch bank ABN Amro. The transport link was developed at a cost of almost US$900M.
Moody’s added that debt service needs, in the face of such lower revenue from the toll tunnel, meant the link did not merit an investment grade rating – even after allowing for an optimistic ramp-up profile for traffic flows.
The rating remains under review for possible further downgrade despite LCT’s good liquidity reserves and its forecast rise in traffic as alternative roads are cut back. Moody’s said its key concern is over the ability of LCT to service debt but added that the company had sufficient funds to meet all cash calls until late 2009, without further traffic increases.
Lane Cove is not the only toll tunnel in Australia to have suffered revenue difficulties. Following its experience with Cross City, a 2.1km long link elsewhere in the capital, Hong Kong’s Cheung Kong Infrastructure decided to also exit Lane Cove around the time of the opening, in March – a month ahead of schedule (T&TI, July 2007, p12).
