MIIF – BT

MIIF cuts dividend to pay off debts

MACQUARIE International Infrastructure Fund (MIIF) will cut its dividend and use any surplus cash to repay its debts completely by end-2009 in a bid to shore up its battered share price, its fund manager said yesterday. From now on, MIIF will exclude gains on investment disposals from its twice-yearly ordinary dividend, which will be paid only out of regular operating income from its businesses.

Any extra cash will be used to repay unsecured debt, which is expected to reach $60 million next year, MIIF said. This will remove any refinancing risk associated with its corporate debt. MIIF’s shares have plunged 61.4 per cent this year, dragged down by worries over its level of debt. They traded at 38 cents apiece yesterday.

MIIF’s manager said the fund’s unsecured corporate borrowings stood at $27.5 million at end-September and are expected to reach $60 million next year as it draws further on loan facilities to fund investment and working capital needs. The facilities expire in 2011. ‘While MIIF’s corporate facilities have a remaining tenor of three years, we consider the early repayment of corporate borrowings a prudent course of action in the current market,’ said Gavin Kerr, managing director of MIIF’s manager.

As a group, including portfolio companies, MIIF had borrowings of $123.2 million at end-September, including $89.1 million of long-term debt. The fund reported a net loss of $91.4 million for the three months to end-September, plunging deep into the red due to $80.7 million in losses on the fair value of its financial assets during the quarter. A year earlier, MIIF made a net profit of $64.8 million, boosted by fair-value gains of $77.1 million. Net income adjusted to show the earnings out of which future dividends will be paid grew to $51.2 million for the quarter, from $17.4 million a year earlier.

The adjusted net income excludes changes in the value of MIIF’s financial assets, which the fund says do not affect its cash flow or ability to pay dividends for the period. With the new dividend policy, adjusted net income now also excludes gains or losses from the disposal of investments. Mr Kerr said the fund’s infrastructure businesses ‘continue to perform solidly’ and are expected to continue generating reliable cash flows. The fund’s recent share price performance ‘has been disappointing’, he added. ‘While this is primarily a consequence of external factors beyond MIIF’s control, the board and management have developed a range of initiatives to address this share price under-performance.’

MIIF said it expects to pay shareholders a dividend of three cents a share for the six months to end-December, down from 4.25 cents for the half-year to end-June and the lowest dividend payout since end-2005. Recurrent operating income from MIIF’s businesses will continue to be distributed to shareholders. If capital management initiatives result in additional cash flows, ‘MIIF will determine, at that time, whether to fund a special dividend to share holders or buy back shares’, it said.

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