http://www.smh.com.au/nsw/banks-ready-to-alight-from-shaky-train-deal-20100925-1\
5rl0.html
Heath Aston STATE POLITICAL EDITOR
September 26, 2010
EXCLUSIVE
THE project to build Sydney's new train is in financial crisis, with the state
government under pressure to commit to a $350 million bail-out to guarantee its
future.
A confidential briefing document passed to The Sun-Herald shows the government
has been warned that banks are preparing to step away from the $2.4 billion
Waratah train public-private partnership.
Four lending banks want to withdraw $357 million in loans amid fears that the
Reliance Rail consortium, owned by engineering firm Downer EDI, is already
insolvent before a single Waratah train has even been delivered to RailCorp.
Reliance needs at least $250 million to complete the 626 carriages on order by
2013.
The Keneally government has been warned it must either refinance Reliance's
debts or guarantee the bank loans in their current form. Both options would put
at risk other infrastructure projects in NSW by adding nearly $400 million to
the state's liabilities.
Bailing out Reliance would also be another big embarrassment for Labor, which
entered a public-private partnership to protect the NSW taxpayer from financial
risk.
Premier Kristina Keneally confirmed to The Sun-Herald that she was receiving
advice from Treasury on the problems facing Reliance, while shadow treasurer
Mike Baird has been briefed by financial institutions about the ''time bomb'' a
Coalition state government might inherit.
The 78 Waratah trains - the first of which was due in service five months ago -
are beset by defects and there has been more than 20,000 individual technical
and safety queries from RailCorp to the Chinese manufacturers. Only one train is
expected to be in service by the state election, six months from today. Despite
the technical delays similar to those faced by the Millennium train, it is the
debt structure used to create Reliance that has pushed the project to the brink.
The global financial crisis wiped out two companies who had agreed to insure
$1.9 billion of its debt leading ratings agency Moody's to re-rate the debt from
AAA to below ''junk''.
The banks - Westpac, National Australia Bank, Sumitomo Mitsui and Mizuho - are
seeking legal advice about whether Reliance is already in default due to the
failure of the debt insurers. The terms of the contract, negotiated by the NSW
government, allow the banks to refuse to lend the $357 million, due to be drawn
down in February 2012, in a situation of default.
The briefing document to Treasury warns the government that it now faces two
unwanted choices - to step in and take over the project completely, adding a
$2.4 billion liability to the state's balance sheet.
A second option would be to refinance the project and guarantee the bank loans.
Analysts at Commonwealth Bank say a third option would be to bring in a larger
company such as Leighton or French multinational Alstom to take over the project
from Downer.
CBA analyst Ben Brownette said Reliance faces ''funding gaps'' and should be
''recapitalised sooner rather than later''.
Reliance continues to insist it finance remains in place. A fortnight ago it
responded to yet another downgrade by Moody's, saying there was no sign that
banks had moved towards exercising ''termination rights''.
Ms Keneally said the government still expected Reliance to deliver the trains as
demanded by the contract: ''I'm not going to be making any detailed assessments
of what we will or won't do but we are very aware of the situation.
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Waratah near Clarendonby HM27012,464 views
Kristina Keneally is such an airhead...
clubpenguin777 1 year ago
I saw that, cannot wait for them
Bails992 1 year ago