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U.S. Roads, Airports Being Sold To Private Investors

U.S. Roads, Airports Being Sold To Private Investors

Reuters
August 4, 2008

Cash-strapped U.S. state and city governments are likely to sell or lease more highways, bridges, airports and other assets to investors desperate for stable returns after being frazzled by the credit crisis.

The trend is set to pick up speed given worsening budget deficits in state capitals and city halls nationwide.

It will also be welcomed by Wall Street bankers hoping to help create and market so-called “infrastructure” transactions at a time many debt markets remain paralyzed, and after major U.S. stock indexes fell into bear market territory.

“When you are nervous about everything else, you put your money in a toll road,” said John Schmidt, a partner at the law firm Mayer Brown LLP in Chicago. “That’s the logic of infrastructure. Returns are stable and predictable. You won’t get fabulously rich, but you’ll get stable cash flow.”

The latest enthusiasm for at least partially privatizing infrastructure assets came on July 30 from New York Gov. David Paterson, who is trying to plug a budget deficit caused in part by lower tax revenue as Wall Street retrenches.

“We’re just looking at ways to be more efficient and that’s why I used the term public-private partnerships — trying to find some creative solutions,” Paterson said. “The reason I’m avoiding taxes is because I think taxes are addictive.”

Bankers and others in the industry say there is pent-up demand from dedicated infrastructure funds and public pension funds to invest in hard assets — perhaps $75 billion to $150 billion of equity capital — but not enough supply.

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