Macquarie Group has spread its tentacles even closer to the heart of NSW with the news that Liberal Party and Opposition Leader, Barry O’Farrell has appointed Max Moore-Wilton as an advisor.

Moore-Wilton is being appointed for his expertise in “infrastructure”.

Sounds like a joke after you realise that Max’s main gig is chairing Sydney Airport and Macquarie Airports. Since November last year Macquarie Airports has needed around $1.2 billion in capital injections to meet capital spending needs and now debt repayments because it has too much debt and banks won’t lend to it.

Macquarie Airports sold small shares in some of its European Airports to unlisted Macquarie funds for $1.5 billion in an in-house recapitalisation of itself and Sydney Airport. It’s from those funds that the November injection was made and the latest one will be paid from. Without that in-house transaction you’d be entitled to wonder whether Macquarie Airports and Sydney Airport might not be in the hands of different owners by now, or perhaps in administration.

If there was no in-house deal, Macquarie Airports would have had to make an embarrassing issue of its stapled securities to investors to try and raise the money: that would have required Macquarie Group and executives to pony up with their shares of the loot, at a time when markets were very nervous. As well as other investors who have seen the market price more than half in the past 16 months, would not have been enthusiastic supporters of any issue. It could have been a disaster; a PR disaster for Macquarie and everyone if Sydney Airport was placed in administration.

Max gained his fame terrorising Federal public servants on behalf of John Howard, but before that he ran a slashing campaign at the NSW Roads and Traffic Authority, the old Maritime Services Board and at the Australian National Line. At all three he was earned his nick name “Max the axe” for slashing staff numbers and services.

He did the same for Macquarie Bank (Now Macquarie Group) at Sydney Airport and Macquarie Airports where he cut staff numbers, boosting income, charged for every service that could be charged for (except the air and sunlight) at Sydney Airport, and then stepped back to become chairman.

Now he’s going to advise Barry O’Farrell on infrastructure: “In a significant coup, the NSW Opposition has lured Max Moore-Wilton, a former head of the department of prime minister and cabinet, to advise it on ways to halve the time needed to deliver major infrastructure projects, an issue that goes to the heart of the Labor Government’s unpopularity.”

Perhaps the Liberals should have waited until Macquarie Airports reported its results this week. It has effectively joined with other shareholders in Sydney Airport to pump in more than $800 million in new capital so the business can meet debt repayments. Macquarie Airports will contribute around $630 million, given it controls over 71% of the airport.

This equity injection is in addition to the $370 million that Map contributed to reduce Sydney Airport debt alongside a partial refinancing in November of last year. That’s a billion from Map alone for Sydney Airport in four months.

The injection was done because Sydney Airport’s “shareholders believe it is prudent, given the current external environment, to implement a deleveraging strategy,” Map said in its stockmarket statement.

In other words Map and its other shareholders got in early before any one in the market started focusing on the debt position of Sydney Airport.

It has $450 million maturing September 2009 and a further $420 million in November.

The market price of the stapled securities have slid from a high of around $4.60 in late 2007, to yesterday’s low point of $1.635.

When the banks won’t lend on Sydney Airport because of its existing high debt levels, courtesy of Max Moore-Wilton, his board and the Macquarie business model, then you know that’s an unqualified failure in infrastructure planning.

That’s just the sort of approach the NSW Liberal party and Barry O’Farrell will bring to Government if elected.

No wonder NSW politics is a case of Tweedledumb (Nathan Rees and the ALP ) and Tweedledumber (The Libs and Barry O’Farrell).

Peter Fray

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