S&P cuts Lane Cove bonds to BB-

Standard & Poor's said it lowered the rating on A$1.14 billion senior secured bonds issued by Lane Cove Tunnel Finance Co. Pty. Ltd. to BB- from BBB-, and placed the rating on CreditWatch with negative implications.

S&P said the action reflects concerns about the continued underperformance of the Lane Cove toll road.

"Despite the strong rationale for the Lane Cove Tunnel, traffic numbers continue to fall well short of expectations," S&P credit analyst Philip Grundy said in a written statement.

Protracted underperformance of traffic raises the likelihood that liquidity will be exhausted before breakeven traffic is achieved, the analyst said.

"Based on our current analysis of the project and using conservative traffic growth forecasts, the project is likely to face liquidity problems by the end of 2009 or early in 2010," Grundy noted.

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