CONFDENTIAL
XCC(92)57
Financial Analysis
16
The "expected case" assumes that the lending environment when the AA arranges its debt will be reasonably favourable. On this basic assumption and others regarding the likely acceptable debt maturities, interest rates and debt service cover ratios, Wardley's first assessed the maximum likely level of debt which could be raised without Government guarantees. Having established a debt ceiling of around $37 billion in nominal terms, the level of equity was then derived to complete the funding requirement. On this basis, the key elements of the expected case derived
were -
March 1991
prices
Nominal
Government Equity
$13,600m
$16,600m
Initial Debt
$23,300m
$37,000m
Pre-completion land
$ 1,290m
$ 1,795m
revenues
Debt: Equity
Return on Equity
Final Maturity of Debt
Minimum Debt Service
Cover Ratio
17
2.2 : 1
14.66%
11.5 years
1.37
This "expected case" is considered realistic and robust. Nevertheless, Wardleys have also developed, in consultation with the PAA, a "low case" which assumes an increase in costs, a lower level of traffic growth, lower real estate revenues and a project completion delay of one year. In order to provide adequate support to the AA in this case, it was identified that additional equity of $8.5 billion at nominal prices or $5.9 billion (in March 1991 prices) would be required. In this case, the project
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