Connector Motorways has collapsed into administration with $1.16 billion in debt after the expiry of a fourth stay of execution from financial backer MBIA Insurance.
The company, which owns and operates the Lane Cove Tunnel and Military Road E-Ramp roads, had previously been operating under a “standstill” agreement, but MBIA has terminated that deal. Connector has been unable to pay interest on the bonds.
KordaMentha partners Martin Madden and David Merryweather have been appointed as administrators by security trustee BTA institutional services Australia. In a statement, Madden said the team does not intend to make significant operational changes.
“The objective of the receivers is to put the tunnel assets on a firm financial footing. We will be working to assess the best option for the tunnel’s future, including a sale,” Madden said.
“Operationally, the tunnel and Military E-Ramp are performing well with patronage having increased by almost 9% over the past 12 months ending December 2009.”
Madden and Merryweather also said the Lane Cove Tunnel and the Military Road E-ramp will also continue to operate as per usual.
“We intend to work closely with the management team, the RTA and the State Government to secure a long-term sustainable business for what is a valuable asset in Sydney’s road system.”
Madden could not be reached for comment.
Connector was founded in 2003 in order to build and operate the toll roads until 2037, at which time the New South Wales Government intended to take the roads over.
The company is partly owned by Leighton Holdings, Mirvac and Hong Kong-based Li Ka-shing, which have all written off their investments in the project. Potential buyers reportedly include Transurban and Queensland Investment Corp.
The Lane Cove Tunnel did not meet expectations when it first opened, with initial volume traffic of about 55,000 per day – half of the 100,000 expected by September 2008. Volumes have continued to stay around the 55,000-60,000 mark.
The collapse follows several other poor performances from toll roads. The Cross City Tunnel collapsed in December 2006, and was acquired for $695 million in September 2007, while the $700 million airport link collapsed just six months after its opening in 2000.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
