Transurban faces North American traffic hazard ahead
Transurban might be forced to inject capital or seek debt covenant waivers as North American road traffic plummets.
Transurban might be forced to inject capital or seek debt covenant waivers for its private activity bonds as North American road traffic numbers plummet amid the COVID-19 shutdown, Macquarie analysts said.
US roads face volume declines of 70-80 per cent, along with price falls, and an extended shutdown similar to Europe’s would see covenant ratios become pressured. Transurban is due to release its quarterly traffic data for North America on Thursday.
“US assets have added price pressure,” Macquarie said. “The length of the shutdown may require Transurban to seek debt covenant waivers for the private activity bonds, or possibly inject capital.” However, it added: “With recent liquidity enhanced, Transurban is in a good position to manage this risk.”
Transurban operates three roads in Washington and one in Canada’s Montreal. Traffic fell 65 per cent in the last week. The company has $3.5bn of funds available from April this year to the end of the 2021 financial year, with $2.9bn committed through capital spending or debt refinancing. It raised an extra €600m ($1.08bn) in the European bond market on April 2.
It has abandoned its second-half dividend guidance, and UBS expects the 31c payout will be slashed to 11c, with only underlying cashflow being paid out.
Transurban shares rose 5.13 per cent on Tuesday to $12.91.
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