RiverCity admits financial woes following write downs on Clem 7 tunnel
Toll operator RiverCity Motorway Management Ltd (ASX: RCY) said on Tuesday that it may have to deal with a substantial financial problem very soon following the $1.56 billion write downs of its Clem 7 tunnel road in Brisbane.
That came as the anticipated traffic volume for the first five months in the cross-city tunnel did not materialised, leading to an annual loss of $1.67 billion by the end June this year.
RiverCity said that the series of setbacks would greatly affect its ability to operate efficiently and the company's future would now depend on traffic levels on the Brisbane toll road, toll pricing and possible adjustment with the group's lenders.
The toll group said that overall revenue for fiscal 2010 also declined, posting only $534.8 million as compared to the $616.3 million it garnered in the prior year while toll revenue for the year managed to register only $5.24 million after the series of toll reductions from April to July and topped by the free toll implemented during the initial month of operation.
RiverCity chairman Robert Morris said that the group is now focusing on ways to increase traffic on Clem 7 in order to honour the company's financial obligations, which could prove more difficult once its existing cash reserves were all used up.
Mr Morris admitted that the group's situation could be regarded as critical yet for now the management's concentration is wholly trained on traffic build ups for the coming months, stressing that "to maximise the number of potential users of the tunnel, tolls will remain at their current reduced level for the remainder of 2010."
Nevertheless, RiverCity's board of directors is optimistic that the group would be able to meet its debts, citing that cash reserves as of June 30 stood at $127 million while another $106 of cash reserves became accessible by August 27.