Macquarie Infrastructure CorporationMIC has successfully divested Bayonne Energy Center ("BEC") and secured all the required regulatory approvals related to the deal. The spin-off is likely to strengthen the company's balance sheet and liquidity in the days ahead.
Inside the Headlines
BEC was a gas-fired, 644 megawatt, mid-merit electricity producing facility of Macquarie. The company had acquired BEC in 2015 and expanded the facility in 2018. BEC distributes power into the city of New York through a cable that extends from Bayonne, NJ to a substation located in Brooklyn, NY. Macquarie used to operate the business on a land held by its International-Matex Tank Terminals ('IMTT') business.
Macquarie divested BEC to a Morgan Stanley-managed investment fund company for $900 million in cash and presumed debt. Adjusting transaction fees and expenses, as well as customary purchase price amendments, the company secured $649 million cash proceeds from the transaction.
At the time of signing the deal in July 2018, Macquarie stated that the BEC divestiture will significantly help deleverage its balance sheet. In fact, the company intends to replay roughly $150-million debt (due on its IMTT business revolving credit facility) with the cash proceeds from this sale. Notably, Macquarie estimates that its net-debt to Earnings before interest, tax, depreciation and amortization (EBITDA) ratio will likely be less than 4.5x by 2018-end, on the back of this divestiture. In addition to this, the company also intends to fund future growth investments and provide higher returns to shareholders with these proceeds.
Apart from the BEC spin-off, Macquarie is poised to grow on the back of strong end-market demand, business acquisitions, strategic investments and lower corporate tax rates. Over the past six months, shares of this Zacks Rank #1 (Strong Buy) company rallied 7.9%, as against the 2.6% loss recorded by the industry it belongs to.
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