CANADA - Concerns over debt last week scuppered plans by the Canada Pension Plan Investment Board (CPPIB) to acquire a 49% stake in Auckland International Airport (AIAL).
Proposals originally described by CPPIB as "compelling" would have created a new listed airport company which was 39%-49% owned by the CA$120.5bn (€89bn) public-sector scheme. However, the last week said it was "disappointed" at AIAL's near-unanimous decision to end discussions.
In its own statement, AIAL cited as its primary reason for breaking off talks a likely "significant increase" in risk associated with leverage upped from CA$911m to CA$2.6bn within five years. It said the proposed debt financing "would have reduced the company's financial flexibility and imposed stringent ring-fencing requirements, limiting the company's ability to grow its business".
It also identified CPPIB's lack of development expertise as a key concern. "While CPPIB would no doubt have been a committed long-term investor, they are clearly not able to bring industry or tourism experience," the statement said.
Only one director at AIAL is said to have wanted the deal recommended to shareholders. The others believed "the proposal would introduce an unacceptable increase in risk which would most likely impact the long-term value and prospects of the company in the future".
But CPPIB did at least secure its place a Macquarie-led infrastructure investment consortium that last week agreed to acquire US utility Puget Energy. A deal has been signed comprising CA$3.2bn of capital provided by the consortium, $1.6bn in newly-issued debt and $2.6bn in existing debt.
The consortium also included British Columbia Investment Management Corporation (bcIMC), which manages public-sector pension funds.