Moody's downgrades Australian PPP project

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Moody's downgrades Australian PPP project

Moody's Investors Service has downgraded the senior secured rating of the Perth Courths PPP operator to Ba2 from Ba1.

Western Liberty Group (WLG) was established by ABN Amro and Brookfield Multiplex to design, construct, operate, and provide long term maintenance for Perth Courts in Western Australia under a public private partnership (PPP).

In December 2006, the Industry Funds Management Australian Infrastructure (IFMAI) Fund acquired 100% of WLG. AustralianSuper's interest in the asset is 38.6% through the IFMAI participation.

WLGF is the financing vehicle for the project.

WLG has outstanding bonds of AU$77 million, which were issued in 2006 at a credit margin that remains below those prevailing in the current market, according to Moody's. The bond has a scheduled maturity in 2018 and a legal maturity in 2020.

Mary Anne Low, a Moody's Analyst, stated:

The rating downgrade reflects continued refinancing challenges facing WLGF due to prevailing credit margins remaining materially above the levels incorporated in the original rating. These refinancing challenges, plus WLGF's extremely high financial leverage, position the company's credit profile at a level that is no longer consistent with its previous rating. Although the final maturity date of the bonds is still a few years away, WLGF has very limited financial flexibility, given its high financial leverage, coupled with its inability to increase its revenues to provide the required coverage of increased debt service costs.

Moody's said that WLGF's rating continues to consider its predictable cashflow generation prior to the refinance, given the project's low business risk profile underpinned by an availability-based revenue stream from the State of Western Australian (State; Aaa negative). Moody's also said that the rating will also likely to be downgraded if the rating of the State is downgraded.

Perth's District Court Building (DCB) accommodates the District Court of Western Australia (WA) and a number of court support groups. The DCB was officially opened on 6 June 2008 and is used for a range of criminal jury trials and civil matters.

The project was developed on a design, build, finance, operation and maintenance (DBFOM) basis for a period of 24 years from the commencement of the project.

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