Macquarie Infrastructure Corporation (NYSE: MIC) (“MIC” or the “Company”) today announced that, in response to the impact of COVID-19, the Company is withdrawing its guidance and suspending its quarterly cash dividend.
“Since our March 18, 2020 trading update, the global impact of COVID-19, including limitations on travel, has reduced demand for the products and services provided by our Atlantic Aviation and MIC Hawaii businesses, while utilization at our IMTT business has continued to improve,” said Christopher Frost, chief executive officer of MIC. “Given the uncertainty stemming from COVID-19, we are withdrawing the guidance provided to the market on February 25, 2020 and suspending the quarterly cash dividend. The measures we are announcing today will increase our balance sheet strength and liquidity and position us well to withstand the current slowdown in activity.”
MIC remains focused on ensuring the health and safety of the employees and customers of its operating businesses and is implementing a range of cost control initiatives in response to the slowdown in activity. “Our people are critical to delivering the essential services provided by our businesses and, to the extent possible, our operating businesses will retain current employees and maintain healthcare plans,” Frost added.
To increase liquidity, on March 17, 2020 MIC drew $599 million on its holding company Revolving Credit Facility and $275 million on its Atlantic Aviation Revolving Credit Facility. The drawdowns added to the Company’s approximately $300 million of cash on hand.
MIC intends to repay and cancel the Atlantic Aviation Revolving Credit Facility. Cancelling the Revolving Credit Facility will mean that the remaining Atlantic Aviation Term Loan, which matures in December 2025, will not be subject to an ongoing leverage-based maintenance covenant.
“MIC and its subsidiaries are in compliance with all debt covenants” Frost noted. “There are no cross-collateralizations of liabilities among MIC’s operating businesses or any holding company guarantee of the liabilities of any of MIC’s operating business.”
The MIC board of directors’ suspension of the Company’s cash dividend will result in MIC retaining approximately $260 million should the suspension remain in place through 2020. As a result of the suspension of the dividend, MIC has no immediate need for additional capital and expects to fund its financial obligations in 2020 from the $300 million on hand prior to drawing down on its revolving credit facilities and cash generated by operating activities.
On March 18, 2020 MIC updated the market on the performance of its businesses noting little impact from COVID-19 through the first ten weeks of the year and improved performance by IMTT as a result of increasing demand for storage of petroleum products. Since that update the drivers of performance at each of Atlantic Aviation and MIC Hawaii have deteriorated, while those at IMTT have improved.
Storage utilization at IMTT is expected to increase to over 93% by mid-April from 90.2% in mid-March. Notable new leases include those for 800,000 barrels of crude oil storage and approximately 700,000 barrels of chemical and distillate storage at its St. Rose, LA terminal. The leases entered into in March have a volume weighted average duration of approximately one year.
At the end of March, average daily fuel sales declined by approximately 80% at airports on which Atlantic Aviation operates compared with the same period last year. Atlantic Aviation continues to support emergency services, military, and civilian flights across its nationwide network of 70 fixed base operations.
Restrictions on travel, including a mandatory 14-day quarantine on arrival in the islands, have resulted in an approximately 85% decline in visitors to Hawaii. The decline has reduced activity at various hotels and restaurants in Hawaii decreasing demand for gas and gas services provided by Hawaii Gas by approximately 60%. Hawaii Gas continues to meet the needs of its 35,000+ residential customers and other commercial customers.
Strategic Alternatives Update
On October 31, 2019 MIC announced its intention to pursue strategic alternatives for the Company and has since been actively engaged in processes that could result in the sale of the Company or one or more of its operating businesses. MIC continues to believe that this course of action will ultimately maximize value for shareholders and it intends to move forward with these alternatives, although recent volatility in the capital markets and the limitations of travel bans and other restrictions on interactions imposed by COVID-19 are expected to slow the process. The measures undertaken to date, including the suspension of the quarterly dividend, will provide MIC with additional financial flexibility to proceed with such processes in a manner consistent with maximizing value for shareholders.
“We remain confident that there is a significant opportunity to unlock value for our shareholders through a sale of the Company or one or more of our businesses and we are continuing to pursue all opportunities that we believe could be in the best interests of the Company and its shareholders,” said Frost.
MIC intends to update the market with respect to the performance of its operating businesses during the first quarter of 2020, with the publication of interim financial and operational results at the end of April.