Interest bill on $8b debt pushes Sydney Airport into the red

[Bernie P]

Interest bill on $8b debt pushes Sydney Airport into the red
Scott Rochfort
March 5, 2009

SYDNEY AIRPORT has added to the jitters surrounding the state of its financial health, after it reported a $146 million loss and a blow-out in the interest bill on its $8.1 billion of debt.

Its full-year accounts show its income fell well short of its interest bill last year, offering a possible explanation why its major shareholder, Macquarie Airports, announced last week it would divert the bulk of an intended $1 billion share buyback as an equity injection into the airport.

The airport reported earnings before interest and tax (EBIT) of $460.7 million for the year - $47.9 million higher than the previous year.

Despite the rise, it was still $195.1 million short of the $655.8 million in costs Sydney Airport incurred financing its massive pile of debt, which includes $1.5 billion of preference shares which attract a fixed 13.5 per cent dividend rate.

Its financing costs increased $81 million, partly due to the cost of expanding the airport's international terminal.

The airport also revealed it had net liabilities of $1.28 billion on its balance sheet. But it said the $3.48 billion increase in its equity value since the airport's privatisation in 2002 offset this.

It said all its debt covenants had been met and budgeted cash flows for 2009 "show a significant surplus after debt service".

MAp, which owns a 82 per cent stake in the airport with several other Macquarie funds, declined to discuss the audited accounts, which have been quietly released by the airport.

It argued the results were already announced on January 23, when Sydney Airport reported a 2 per cent increase in revenue and a 0.6 per cent rise in earnings before interest, tax, depreciation and amortisation.

At the time, MAp's chief executive, Kerrie Mather said the result demonstrated the airport's "resilient operating model".

The announcement did not disclose the loss after the airport's interest bill, contained in the more detailed accounts released this week.

At MAp's results briefing last week, the fund said it would inject up to $780 million into Sydney Airport from the "surplus" cash on its balance sheet. Following a capital injection announced in November, the latest injection will extinguish a debt due for repayment by the end of this year. Sydney Airport will not have any debts due for repayment until 2011.

One factor that has helped strengthen the airport's balance sheet against its increasing debts has been the rise in the valuation it has put on its asset values. In one striking example, Sydney Airport's operators' licence - which it treats as an intangible on its balance sheet - increased in value from $544 million on June 30 2003 to $1.9 billion on December 31.

Sydney Airport's $8.1 billion of debts - shown in the latest accounts - are more than six times what they were when the asset was sold by the Howard government to a Macquarie-led Southern Cross Airports consortium in June 2002. When the airport was first privatised in 2002 it had borrowings of $1.2 billion.

MAp shares rose 5.5c to $1.45 yesterday. They hit a near six-year low of $1.30 on Tuesday.

Source: SMH

[NickN]

Macquarie Airports however posted a 87pc increase in profits so overall they are doing well.

Link to the story: http://www.news.com.au/business/stor...rom=public_rss

[Graham B]

They could always increase the parking fees again( that would take them close to the mark)

Benjo

[NickN]

Or impose a fee allowing us to breathe the air inside the airport. Maybe even a toilet tax.

[Sarah C]

Don't give them ideas - they might charge us to use the observation deck!

[Joseph D]

SACL have replied to the article

5 March 2009
Letter to the Sydney Morning Herald

Letter to the Sydney Morning Herald

Dear Editor

The Sydney Morning Herald story titled "Interest bill on $8 billion debt pushes Sydney Airport into the red" misrepresents the financial health of the Sydney Airport business. Sydney Airport is in a strong financial position, generating EBITDA of $653 million in the year to December 2008 of which $250 million remained as excess operating cash after all external debt service.

The airport reported its results for the 2008 financial year on 23 January 2009. EBITDA increased 7.4% on the previous year, demonstrating the resilience of the airport. This strong financial position has been further supported by the decision of the airport's shareholders to strengthen the balance sheet and replace the tranches of debt maturing this year with equity. This will enable the airport's management to focus on delivering the key growth and service initiatives planned at the airport.

Sydney Airport's interest payment, as reported in its statutory results, and described in a number of paragraphs in the directors' report, includes shareholder dividends on redeemable preference shares which are paid after all costs (including debt servicing) are met. Importantly, the airport's net senior debt level after the agreed shareholder contribution will be approximately $4.5 billion. The total debt figure contained in the financial statements includes the redeemable preference shares, which are held by all shareholders and are treated as debt for the purposes of the financial reports.

Sydney Airport remains well positioned for 2009, with new airline services, the international terminal expansion underway and a strong balance sheet with no debt maturities until September 2011.

Yours sincerely

Russell Balding
Chief Executive Officer
Sydney Airport

http://www.sydneyairport.com.au/SACL...ing+Herald.htm