Macquarie under Pressure after Discounted Sale

Submitted by Jim Thesiger on 27 October, 2009 - 04:18

The worldwide diversified financial service provider Macquarie Group (MQG) has faced renewed pressure in the value of its holdings in debt-laden infrastructure funds after it saw the sale of a stake in one of the company’s flagship European funds with almost 15 percent discount to the valuation which was conducted just a few months earlier. The discounted sale sent a clear signal that leveraged infrastructure as an asset class is still not favoured by the investors of northern hemisphere. The recent development might force the group to go for issuing additional write-downs. It is to be mentioned that the group’s investment is pretty much tied up in unlisted funds and the transactions are not often disclosed.

On Tuesday, Macquarie International Infrastructure Fund sold off almost all of its holdings in Macquarie European Infrastructure Fund which is unlisted. The sale of what amounted to a 4.5 percent interest in MEIF for $S132 million efficiently values the European infrastructure fund at $S2.9 billion. Macquarie- the parent company does not release the carrying value of MEIF but it is thought that the transaction was executed above the carrying value for the asset which invests in airports, rail and toll roads in Europe.

Despite Macquarie’s direct exposure to MEIF being 4.6 percent, it is the co-investor in the asset sitting in a massive fund. The Macquarie authority refused to make any remarks stating that according to the company policy, it does not discuss about the financial information until the profits are released. Market analysts believe that the company profit will hit the $490 million mark for the six months to 30th of September which is 19 percent lower than the profit it gained in the same period of the previous year. However, at the same time it is higher than the guidance that Macquarie came up with ($435 million). Macquarie is expected to hand down the interim results on Friday.