Macquarie Airports Plans Share Buyback After First-Half Loss

Macquarie Airports, a fund managed by the Australian investment bank Macquarie Group, posted a first-half loss Wednesday but said it would reduce its stakes in two airports to cut debt, sending its shares up nearly 10 percent.

Macquarie Airports said the move would help finance a share buyback program of up to 1 billion Australian dollars, or $870.7 million, and bolster its share price, which has fallen by almost one- third so far this year.

Announcing a first-half loss of 274.3 million dollars, Macquarie Airports said it would sell a 26.9 percent stake in Copenhagen Airport and a 26.1 percent stake in Brussels Airport to another Macquarie fund for about 1.5 billion dollars.

Also, it will not be pursuing any upcoming airport privatizations in the short term, like the leases of Chicago Midway Airport and Prague Airport, the company said.

Shares of Macquarie Airports rose 26 cents, or 9.2 percent, to 3.08 dollars Wednesday, as the initiatives reassured investors who have questioned the model of companies like Macquarie and its smaller rival Babcock & Brown.

“Certainly, investors had a level of hesitation,” said Angus Gluskie, a portfolio manager at White Funds Management. “Today’s actions show Macquarie is prepared to take action, such as a buyback, if the market is not prepared to do it at the right price. It’s a really sensible action,”

The pullback from investment in new airport projects comes after investors have battered infrastructure and real estate funds shares to well below their asset values, shunning any group heavily exposed to debt in the face of the global credit crunch.

Macquarie and Babcock buy assets like ports and utilities and then bundle them into listed and unlisted funds from which they earn management fees.

“While it is not our policy to comment on speculation regarding investment opportunities, the actions we have announced today are clearly inconsistent with seeking any significant participation in any major investment opportunity in the short term, such as Chicago Midway,” Kerrie Mather, the chief executive officer of Macquarie Airports, said at a briefing.

Macquarie Airports, which also has stakes in Sydney airport, Bristol airport in Britain and Japan Airport Terminal, said its underlying performance was strong and the outlook for 2008 solid. Mather said, however, that the company would have to work hard in the second half of the year.

The six-month loss was based on revaluations of its airport holdings, having cut its asset backing per share by 7 percent to 4.57 dollars. Macquarie Airports shares are currently trading at a 32 percent discount to their asset backing.

Macquarie Airports reported 9.6 percent growth in first-half earnings before interest, tax, depreciation and amortization, despite cutbacks in flights in the face of sharply higher fuel costs.

It reaffirmed that it would make a distribution of 27 cents a share this year, including the 13 cents paid for the first half.

Other infrastructure and real estate companies, including the toll road operator Transurban Group and Centro Properties, are shoring up their balance sheets by cutting distributions.

Originally published by Reuters.

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