Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-138010 and
333-138010-01

 

PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED OCTOBER 16, 2006

 

9,000,000 Shares

 

Macquarie Infrastructure Company Trust

 

Each Share of Trust Stock Represents One Beneficial Interest in the Trust

 

 

 

 

We are selling 9,000,000 shares of our trust stock, each representing one beneficial interest in the trust. The purpose of Macquarie Infrastructure Company Trust is to hold 100% of the interests of Macquarie Infrastructure Company LLC. Each beneficial interest in the trust corresponds to one interest of Macquarie Infrastructure Company LLC.

 

The shares trade on the New York Stock Exchange under the symbol “MIC.” On October 24, 2006, the closing price of shares of our trust stock on the New York Stock Exchange was $29.90.

 

The underwriters may also purchase up to an additional 1,350,000 shares of trust stock from us at the public offering price, less the underwriting discounts, within 30 days from the date of this prospectus supplement to cover overallotments.

 

Investing in the shares involves risks. See “Risk Factors” on page S-14 of this prospectus supplement.

 

 

 

 

 

Delivery of the shares will be made on or about October 30, 2006.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

 

 

 

 

 

 

 

 

The date of this prospectus supplement is October 24, 2006.

 

TABLE OF CONTENTS

 

 

Australian banking regulations that govern the operations of Macquarie Bank Limited and all of its subsidiaries, including our Manager, require the following statements: Investments in Macquarie Infrastructure Company Trust are not deposits with or other liabilities of Macquarie Bank Limited or of any Macquarie Group company and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither Macquarie Bank Limited nor any other member company of the Macquarie Group guarantees the performance of Macquarie Infrastructure Company Trust or the repayment of capital from Macquarie Infrastructure Company Trust.

You should rely only on the information contained in this prospectus supplement and the accompanying prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information. If anyone provides you with different information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

 

In this prospectus supplement and the accompanying prospectus, we rely on and refer to information and statistics regarding market data and the industries of our businesses and investments obtained from internal surveys, market research, independent industry publications and other publicly available information, including publicly available information regarding listed stock. The information and statistics are based on industry surveys and our Manager’s and its affiliates’ experience in the industry.

 

This document is in two parts. The first part is the prospectus supplement, which discusses the terms of this offering of shares of our trust stock. The second part is the accompanying prospectus, dated October 16, 2006, that is also a part of this document. This prospectus supplement and the accompanying prospectus are part of a registration statement that we filed with the Securities and Exchange Commission, or SEC, using the SEC’s shelf registration rules. In this prospectus supplement, we provide you with specific information about the terms of this offering of the shares. Both this prospectus supplement and the accompanying prospectus include important information about us, the shares and other information you should know before investing in the shares. This prospectus supplement also adds to, updates and changes some of the information contained in the accompanying prospectus. To the extent that any statement that we make in this prospectus supplement is inconsistent with the statements made in the accompanying prospectus, the statements made in the accompanying prospectus are deemed modified or superseded by the statements made in this prospectus supplement. You should assume that the information appearing in this prospectus supplement and the accompanying prospectus, as well as the information contained in any document incorporated by reference herein or therein, is accurate as of the date of each such document only, unless the information specifically indicates that another date applies. See “Incorporation of Certain Documents by Reference.”

 

SUMMARY

	•	The Gas Company, or TGC, a gas production and distribution business in Hawaii;
	•	a 50% ownership interest in IMTT Holdings, the owner/operator of a bulk liquid storage terminal business, International-Matex Tank Terminals, or IMTT; and
	•	Trajen Holdings, which owns and operates 23 fixed base operations, or FBOs, that are being integrated into our existing airport services business, Atlantic Aviation.

	•	Atlantic Aviation, an airport services business that operates 19 FBOs in the United States;
	•	Macquarie Parking, an off-airport parking business; and
	•	a district energy business, conducted through Thermal Chicago and Northwind Aladdin.

	•	“user pays,” such as our airport services, airport parking and bulk liquid storage terminal businesses, the revenues of which are derived from per-use or rental charges;
	•	“contracted,” such as our district energy business, a majority of the revenues of which are derived from long-term contracts with governments or other businesses; and
	•	“regulated,” such as the utility operations of our gas production and distribution business.

	•	They own long-lived, high-value physical assets and generate predictable revenue streams.
	•	All of our businesses, and particularly our airport services, district energy and bulk liquid storage terminal businesses, enjoy consistent, relatively inelastic demand for their services, which provides for stability of cash flows.
	•	Our businesses, including our bulk liquid storage terminal and gas production and distribution businesses, benefit from preferred positions in their respective markets.
	•	Our businesses have strong competitive positions, largely due to high barriers to entry, including:

	•	high initial development and construction costs, such as the cost of cooling equipment and distribution pipes for our district energy business and the regulated distribution assets for our gas production and distribution business;
	•	difficulty in obtaining suitable land, such as the waterfront land owned by our bulk liquid storage terminal business;
	•	long-term, exclusive concessions or leases and customer contracts, such as those held by our airport services and district energy businesses; and
	•	lack of cost-effective alternatives to customers in the foreseeable future, such as our district energy business.

	•	Many of our businesses are scalable such that relatively small amounts of growth related capital expenditure can result in significant increases in EBITDA.

	•	Regularly recurring cash items not included in cash from operations, such as annualized cash capital expenditures and principal repayments. We deduct these items since they directly impact estimated cash available for distribution;
	•	Regularly recurring items included in cash from operations that we believe result from timing of cash payments and receipts, such as movements in working capital. We adjust to exclude these items as we do not believe they impact estimated cash available for distribution over time;
	•	Periodically recurring cash payments included in cash from operations but funded, or expected to be funded, from equity contributions or external financing, such as acquisition, integration and broken deal costs. We adjust to exclude these items as they are, or are expected to be, externally funded and do not directly impact estimated cash available for distribution; and
	•	Periodic cash items not included in cash from operations that we expect to occur only occasionally, such as settlements of pre-acquisition items and release of debt reserves. We adjust to include these items as they directly impact estimated cash available for distribution.

	•	The estimated impact of owning businesses acquired recently for the full periods presented; and
	•	The estimated impact of the disposal of our MCG and SEW investments and the proposed disposal of our YLL interest.

		For the Year Ended December 31, 2005
Estimated Cash Available for Distribution		MIC				IMTT				TGC				Total
		($ in thousands)
Cash from Operations		$	43,547			$	24,788	(1)						$	68,335
EBITDA										$	26,022	(2)			26,022
Cash items not included in cash from operations(3)			(5,173	)			—				(6,116	)			(11,289	)
Items in cash from operations due to timing(4)			3,125				—				—				3,125
Items in cash from operations externally funded(5)			2,964				—				—				2,964
Divestments of MCG, YLL and SEW(6)			(18,205	)			—				—				(18,205	)
Additional interest expense(7)			(4,171	)			—				(8,544	)			(12,715	)
Estimated Cash Available for Distribution		$	22,087			$	24,788			$	11,362			$	58,237

(1)		Cash from operations for IMTT consists of:

	•	$28,000 distribution guaranteed by the Shareholders’ Agreement; net of
	•	the estimated incremental base management fee of $3,213.

(2)		EBITDA for TGC consists of:

	•	$27,923 of EBITDA generated by TGC; net of
	•	the estimated incremental base management fee of $1,325; and
	•	state taxes of $576.

(3)		Cash items not included in cash from operations consist of:

$ in thousands		MIC				TGC				Total
Cash capital expenditures		$	(5,099	)		$	(6,116	)		$	(11,215	)
Principal payments			(644	)			—				(644	)
Minority interests in estimated cash available for distribution			(124	)			—				(124	)
Cash settlement of pre-acquisition item			694				—				694
		$	(5,173	)		$	(6,116	)		$	(11,289	)

(4)		Items in cash from operations due to timing consists entirely of working capital movements.
(5)		Items in cash from operations externally funded consist of:

$ in thousands		MIC
Costs of unsuccessful acquisition bids		$	2,051
Acquisition costs			913
		$	2,964

(6)		Impact of divestments consists of:

$ in thousands
MCG		$	(3,230	)
Yorkshire Link			(6,628	)
SEW			(8,347	)
		$	18,205

(7)		Additional interest expense for MIC relates to our Airport Services Business new financing that resulted in $100 million in additional debt, net of reduced interest expense related to a lower margin obtained on the refinanced portion. Additional interest expense for TGC relates to a new $160 million debt facility at TGC.

		For the Six Months Ended June 30, 2006
Estimated Cash Available for Distribution		MIC				IMTT				TGC				Total
		($ in thousands)
Cash from Operations		$	23,401			$	6,197	(1)						$	29,598
EBITDA										$	10,596	(2)			10,596
Cash items not included in cash from operations(3)			4,343				—				(3,450	)			893
Items in cash from operations due to timing(4)			1,498				—				—				1,498
Items in cash from operations externally funded(5)			704				—				2,000				2,704
Divestments of MCG, YLL and SEW(6)			(6,803	)			—				—				(6,803	)
Interest expense adjustment(7)			2,617				—				(3,664	)			(1,047	)
Estimated Cash Available for Distribution		$	25,760			$	6,197			$	5,482			$	37,439

(1)		Cash from operations for IMTT consists of:

	•	$7,000 distribution for the first quarter had the acquisition been consummated then; net of
	•	the estimated incremental base management fee of $803.

(2)		EBITDA for TGC consists of:

	•	$10,927 of EBITDA generated by TGC; net of
	•	the estimated incremental base management fee of $331.

(3)		Cash items not included in cash from operations consist of:

$ in thousands		MIC				TGC				Total
IMTT distribution for second quarter		$	7,000				—			$	7,000
Cash capital expenditures			(3,110	)		$	(3,450	)			(6,560	)
Principal payments			(75	)			—				(75	)
Minority interests in estimated cash available for distribution			(472	)			—				(472	)
Cash settlement of pre-acquisition item			1,000				—				1,000
		$	4,343			$	(3,450	)		$	893

(4)		Items in cash from operations due to timing consists entirely of working capital movements.
(5)		Items in cash from operations externally funded consist of:

$ in thousands		MIC				TGC				Total
Costs of unsuccessful acquisition bids		$	378				—			$	378
Integration costs			326				—				326
Acquisition-related expenses			—			$	2,000				2,000
		$	704			$	2,000			$	2,704

(6)		Impact of divestments consists of:

$ in thousands
MCG		$	(2,180	)
Yorkshire Link			(2,429	)
SEW			(2,673	)
Annualization of distributions			479
		$	(6,803	)

(7)		Reduction in interest expense for MIC relates to assumed use of proceeds from disposals and equity raise to pay down debt. Additional interest expense for TGC relates to a new $160 million debt facility at TGC.

	•	improving and expanding our existing marketing programs;
	•	making selective capital expenditures to renew facilities and expand certain operations; and
	•	strengthening our competitive position through complementary acquisitions.

	•	Leveraging Our Relationship with the Macquarie Group.  Our Manager’s expertise in structuring and refinancing the debt of our existing and new businesses, as well as its ability to optimize the capital structure of all of our businesses, has contributed to our efforts to maximize returns to shareholders.

	•	For example, following substantial growth in EBITDA from our airport services business in 2005 over 2004, we were able to increase the level of borrowing by this business while lowering total borrowing costs and maintaining an appropriate debt service coverage ratio. The net proceeds have been reinvested in our new businesses at yields that we expect will be substantially above the cost of the borrowed funds.

	•	Improving and Expanding Our Existing Marketing Programs.  Centralizing the capital management and acquisition-related activities of our businesses has enabled management at the operating company level to focus on improving the performance of these businesses. In particular, operating company management personnel have been freed up to enhance marketing efforts and the deployment of growth capital expenditures, both of which have resulted in the generation of increased levels of distributable cash.
	•	Making Selective Capital Expenditures to Expand Existing Businesses.  We continue to make selected capital expenditures in our businesses to improve facilities and expand capacity, which we expect will produce growth in revenue, EBITDA and cash available for distribution. Anticipated capital expenditures include:

	•	approximately $12.4 million during 2006 and 2007 for upgrades and expansion of certain facilities in our existing airport services business plus approximately $850,000 in Trajen;
	•	approximately $8.4 million beginning in the second half of 2006 for capacity expansion of our district energy business; and
	•	at least $191.0 million during 2006 and 2007 that IMTT intends to spend to expand its storage facilities; IMTT has already received contractual commitments from customers for the majority of the additional storage capacity resulting from the expansion, with the balance of the new capacity to be used to service customers while their existing tanks are undergoing maintenance over the next five years.

	•	Strengthening Our Competitive Position Through Complementary Acquisitions.  We have grown our existing businesses through the successful conclusion of yield-accretive, complementary acquisitions identified by the Macquarie Group, which, in addition to our recent acquisition of Trajen and its 23 FBOs, include:

	•	our acquisition of an FBO at McCarran International Airport in Las Vegas during the third quarter of 2005, resulting in the expansion of our airport services business to one of the fastest growing regional economies in the United States; and
	•	our acquisition of eight additional off-airport parking facilities during 2005, which increased the number of airports served by our airport parking business from 15 to 20.

	•	Focusing on Yield-Accretive Acquisitions in New Sectors.  We have concluded acquisitions of businesses in new infrastructure sectors where our existing businesses and investments had not previously operated. Our acquisitions of IMTT and TGC expand our operations to bulk liquid storage and gas production and distribution, respectively, and we expect both acquisitions to be immediately yield-accretive.
	•	Focusing on U.S. Acquisition Opportunities.  All of the new infrastructure businesses we acquired operate in the United States. Following the disposition of our investments discussed under “— Recent Developments,” 100% of our cash flow will be generated by businesses located in the United States.

Shares of Trust Stock Offered by Us		9,000,000 shares
Shares Outstanding After the Offering		36,212,165 shares
Use of Proceeds		We estimate that the net proceeds from the sale of the shares in this offering will be approximately $252.8 million, or $290.9 million if the underwriters exercise their overallotment option in full.
		We intend to use the aggregate net proceeds from this offering, including any proceeds we may receive from the exercise by the underwriters of their overallotment option, to repay borrowings under MIC Inc.’s acquisition credit facility incurred to finance the acquisitions of TGC, IMTT and Trajen and any remaining amounts for general corporate purposes. See “Use of Proceeds” for more information.
U.S. Federal Income Tax Considerations		Subject to the discussion in “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus, although the matter is not free from doubt, in the opinion of Shearman & Sterling LLP, the trust will be classified as a grantor trust for U.S. federal income tax purposes. As a result, for U.S. federal income tax purposes, you generally will be treated as the beneficial owner of a pro rata portion of the interests in the company held by the trust. Furthermore, subject to the discussion in “Material U.S. Federal Income Tax Considerations” in the accompanying prospectus, in the opinion of Shearman & Sterling LLP, the company will be classified as a partnership for U.S. federal income tax purposes. Accordingly, neither the company nor the trust will incur U.S. federal income tax liability; rather, each beneficial owner of shares of trust stock will be required to take into account its allocable share of our income, gain, loss, deduction and other items for our taxable year ending with or within the beneficial owner’s taxable year.
		To the extent that the company receives dividend income that qualifies for the lower rate of tax applicable to long-term capital gains, holders of shares of trust stock who satisfy certain holding period requirements will recognize dividend income that qualifies for the lower rate of tax (currently, a maximum rate of 15%).
		The company anticipates that more than 90% of a holder’s distributive share of the company’s income during each taxable year will be qualifying income for purposes of the holder’s determination of whether such holder satisfies the

		income requirements necessary to qualify as a regulated investment company for U.S. federal income tax purposes.
		The company also should not be treated as “engaged in a trade or business within the United States” and therefore it should not realize income that would be treated as effectively connected with the conduct of a trade or business within the United States.
		Please refer to the “Material U.S. Federal Income Tax Considerations” section in the accompanying prospectus for information on the potential U.S. federal income tax consequences of the purchase, ownership and disposition of shares of trust stock.
Risk Factors		See “Risk Factors” and other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our trust stock.
New York Stock Exchange Symbol		MIC

		Successor																Predecessor
		Six Months								Year				December 23				July 30				Jan 1				Year
		Ended								Ended				through				through				through				Ended
		June 30,								December 31,				December 31,				December 22,				July 29,				December 31,
		2006				2005				2005				2004				2004				2004				2003
		(Unaudited)
		($ in thousands)
Statement of Operations Data:
Revenue		$	192,127			$	138,254			$	304,743			$	5,064			$	39,304			$	55,762			$	77,849
Operating income (loss)			17,887				13,380				25,351				(18,250	)			4,298				8,662				16,205
Income (loss) from continuing operations			16,998				7,587				15,196				(17,588	)			(5,556	)			(514	)			6,045

														Predecessor
		Successor at												at
		June 30,				December 31,								December 31,
		2006				2005				2004				2003
		(Unaudited)
		($ in thousands)
Balance Sheet Data:
Total assets		$	1,967,473			$	1,363,298			$	1,208,487			$	135,210
Total liabilities			1,384,574				786,693				603,676				75,369
Preferred stock			—				—				—				64,099
Stockholders’ equity (deficit)			574,088				567,665				596,296				(4,258	)

		Six Months Ended
		June 30,								Year Ended December 31,
		2006				2005				2005				2004				2003
		(Unaudited)
		($ in thousands)
Statement of Operations Data:
Revenue		$	120,937			$	110,717			$	250,624			$	210,667			$	193,066
Operating income			25,500				20,761				47,146				35,817				30,412
Net income			9,614				5,133				13,376				7,881				5,890

		At
		June 30,				At December 31,
		2006				2005				2004				2003
		(Unaudited)												(Unaudited)
		($ in thousands)
Balance Sheet Data:
Total assets		$	630,666			$	549,235			$	510,554			$	487,021
Total liabilities			425,454				468,114				445,524				424,759
Stockholders’ equity			205,212				81,121				65,030				62,262

		Six Months								July 1, 2005				Year				August 8, 2003
		Ended								Through				Ended				Through
		June 30,								April 30,				June 30,				June 30,
		2006				2005				2006				2005				2004
		(Unaudited)
		($ in thousands)
Statement of Operations Data:
Revenue		$	82,568			$	70,907			$	129,935			$	132,413			$	104,883
Operating income			11,366				10,792				17,885				19,640				18,730
Income before taxes(1)			7,474				6,386				5,792				10,815				9,625

		At June 30,				At April 30,				At June 30,
		2006				2006				2005				2004
		(Unaudited)
		($ in thousands)
Balance Sheet Data:
Total assets		$	319,277			$	188,774			$	175,075			$	158,957
Total liabilities			207,628				105,913				100,236				92,638
Stockholders’ equity			111,649				82,783				74,769				66,263

(1)		Gain on transfer of swaps of $6.0 million for the six months ended June 30, 2006 has been excluded from income before taxes in the above table, since this amount was eliminated on consolidation at the MIC level.

 

We urge you to carefully read the risks described below and beginning on page 4 of the accompanying prospectus and in Part I, Item 1A “Risk Factors” of our amended Annual Report on Form 10-K/A for the fiscal year ended December 31, 2005, filed with the SEC on October 16, 2006, incorporated by reference in this prospectus supplement, as well as the other information we have provided in this prospectus supplement, the accompanying prospectus and the documents we incorporate by reference, before reaching a decision regarding an investment in the shares.

 

An investment in shares of trust stock involves a number of risks. Any of these risks could result in a significant or material adverse effect on our results of operations or financial condition and a corresponding decline in the market price of the shares.

 

Risks Related to Our New Businesses

 

TGC relies on its synthetic natural gas, or SNG, plant, including its transmission pipeline, for a significant portion of its sales. Disruptions at that facility could adversely affect TGC’s ability to serve customers.

 

Disruptions at the SNG plant resulting from mechanical or operational problems could affect TGC’s ability to produce SNG. Most of the regulated sales on Oahu are of SNG and are produced at this plant. Disruptions to the primary and redundant production systems would have a significant adverse effect on sales and cash flows.

 

TGC depends heavily on the two Oahu oil refineries for liquefied petroleum gas and the primary feedstock for its SNG plant. Disruptions at either of those refineries may adversely affect TGC’s operations.

 

TGC’s business comprises the manufacture of SNG and the distribution of SNG and liquified petroleum gas, or LPG. Any feedstock, SNG or LPG supply disruptions that limit its ability to manufacture and deliver gas for customers would adversely affect its ability to carry out its operating activities. These could include: an inability to renew feedstock purchase arrangements, including our current SNG feedstock agreement which is due for renewal in 2007; extended unavailability of one or both of the Oahu refineries; a disruption to crude oil supplies or feedstocks to Hawaii; or an inability to purchase LPG from foreign sources. Specifically, TGC is limited in its ability to store both foreign-sourced LPG and domestic LPG at the same location at the same time and, therefore, any disruption in supply may cause a short-term depletion of LPG. All supply disruptions, if occurring for an extended period, could materially adversely impact TGC’s sales and cash flows.

 

TGC’s most significant costs are locally-sourced LPG, LPG imports and feedstock for the SNG plant, the costs of which are directly related to petroleum prices. To the extent that these costs cannot be passed on to customers, TGC’s sales and cash flows will be adversely affected.

 

The profitability of TGC is based on the margin of sales prices over costs. Since LPG and feedstock for the SNG plant are commodities, changes in the market for these products can have a significant impact on costs. In addition, increased reliance on higher-priced foreign sources of LPG, whether due to disruptions or shortages in local sources or otherwise, could also have a significant impact on costs. TGC has no control over these costs, and, to the extent that these costs cannot be passed on to customers, TGC’s financial condition and the results of operations would be adversely affected. Higher prices could result in reduced customer demand or could result in customer conversion to alternative energy sources. This would reduce sales volume and adversely affect profits.

 

TGC’s operations on the islands of Hawaii, Maui and Kauai rely on LPG that is transported to those islands by Jones Act qualified barges from Oahu and from non-Jones Act vessels from foreign ports. Disruptions to those vessels could adversely affect TGC’s results of operations.

 

TGC has time charter agreements allowing the use of two barges that have the capability of transporting 424,000 gallons and 657,000 gallons of LPG, respectively. The Jones Act requires that vessels carrying cargo between two U.S. ports meet certain requirements. The barges used by TGC are the only two Jones Act qualified barges capable of carrying large volumes of LPG that are available in the Hawaiian Islands. They are near the end of their useful economic lives, and TGC intends to replace one or both of them

in the near future. To the extent that TGC is unable to replace these barges, or alternatively, these barges are unable to transport LPG from Oahu and TGC is not able to secure foreign-source LPG or obtain an exemption to the Jones Act, the storage capacity on those islands could be depleted and sales and cash flows could be adversely affected.

 

The recovery of amounts expended for capital projects and operating expenses in the regulated operations is subject to approval by the Hawaii Public Utilities Commission, or HPUC, which exposes TGC to the risk of incurring costs that may not be recoverable from regulated customers.

 

In the past, TGC has requested rate increases from the HPUC approximately every five years as its operating costs increased and as capital investments were committed. When the HPUC approved MIC’s purchase of TGC, it stipulated that no rate increase may be implemented until 2009. Should TGC seek a rate increase, there is a risk that TGC will not be granted such increase or that it will be permitted only part of the increase, which may have a material adverse effect on TGC’s financial condition and results of operations.

 

The non-regulated operations of TGC are subject to a variety of competitive pressures and the actions of competitors, particularly from other energy sources, could have a materially adverse effect on operating results.

 

In Hawaii, gas is largely used by commercial and residential customers for water heating and cooking. TGC also has wholesale customers that resell product to other end-users. Gas end-use applications may be substituted by other fuel sources such as electricity, diesel, solar and wind. Customers could, for a number of reasons, including increased gas prices, lower costs of alternative energy or convenience, meet their energy needs through alternative sources. This could have an adverse effect on TGC’s sales, revenue and cash flows.

 

Approximately two-thirds of TGC’s employees are members of a labor union. A work interruption may adversely affect TGC’s business.

 

Approximately two-thirds of TGC’s employees are covered under a collective bargaining agreement that expires on April 30, 2008. Labor disruptions related to that contract or to other disputes could affect the SNG plant, distributions systems and customer services. We are unable to predict how work stoppages would affect the business.

 

TGC’s operating results are affected by Hawaii’s economy.

 

The primary driver of Hawaii’s economy is tourism. A significant portion of TGC’s sales is generated from businesses that rely on tourism as their primary source of revenue. These businesses include hotels and resorts, restaurants and laundries, comprising approximately 40% of sales. Should tourism decline significantly, TGC’s commercial sales could be affected adversely.

 

In addition, a reduction in new housing starts and commercial development would limit growth opportunities for TGC’s business.

 

TGC has certain environmental risks.

 

TGC is subject to risks and hazards associated with the refining, handling, storage and transportation of combustible products. These risks could result in substantial losses due to personal injury, loss of life, damage or destruction of property and equipment, and environmental damage. Losses could be greater than insurance levels maintained by TGC, which could have an adverse effect on TGC’s financial results. In addition, disruptions to physical assets could reduce TGC’s ability to serve customers and adversely affect sales and cash flows.

 

Because of its geographic location, Hawaii, and in turn TGC, is subject to earthquakes and certain weather risks that could materially disrupt operations.

 

Hawaii is subject to earthquakes and certain weather risks, such as hurricanes, floods, heavy and sustained rains and tidal waves. Because TGC’s SNG plant, SNG transmission line and several storage facilities are close to the ocean, weather-related disruptions are possible. In addition, earthquakes may cause disruptions. These events could damage TGC’s assets or could result in wide-spread damage to TGC’s

customers, thereby reducing sales volumes and, to the extent such damages are not covered by insurance, TGC’s revenue and cash flows.

 

TGC may face a greater exposure to terrorism than other businesses because of the nature of its products.

 

Because of the combustible nature of TGC’s products and consumer reliance on these products for basic services, TGC’s SNG plant, transmission pipelines, barges and storage facilities may be at greater risk for terrorism attacks than other businesses. Such attacks could affect TGC’s operations significantly.

 

TGC’s income may be affected adversely if additional compliance costs are required as a result of new safety, health or environmental regulation.

 

TGC is subject to federal, state and local safety, health and environmental laws and regulations. These laws and regulations affect all aspects of TGC’s operations and are frequently modified. There is a risk that TGC may not be able to comply with some aspect of these laws and regulations, resulting in fines or penalties. Additionally, if new laws and regulations are adopted or if interpretations of existing laws and regulations change, TGC could be required to increase capital spending and incur increased operating expenses in order to comply. Because the regulatory environment frequently changes, TGC cannot predict when or how it may be affected by such changes.

 

IMTT’s business is dependent on the demand for bulk liquid storage capacity in the locations where it operates.

 

Demand for IMTT’s bulk liquid storage is largely a function of U.S. domestic demand for chemical, petroleum and vegetable and animal, or V&A, oil products and, less significantly, the extent to which such products are imported into the United States rather than produced domestically. U.S. domestic demand for chemical, petroleum and V&A products is influenced by a number of factors, including economic conditions, growth in the U.S. economy and the pricing of chemical, petroleum and V&A products and their substitutes. Import volumes of these products to the United States are influenced by the cost of producing chemical, petroleum and V&A products domestically vis-à-vis overseas and the cost of transporting the products from overseas. In addition, changes in government regulations that affect imports of bulk chemical, petroleum and V&A products, including the imposition of surcharges or taxes on imported products, could adversely affect import volumes. A reduction in demand for bulk liquid storage, particularly in the New York Harbor or the lower Mississippi River, as a consequence of lower U.S. domestic demand for, or imports of, chemical, petroleum or V&A products, could lead to a decline in storage rates and tankage volumes rented by IMTT and adversely affect IMTT’s revenues and profitability.

 

IMTT’s business could be adversely affected by a substantial increase in bulk liquid storage capacity in the locations where it operates.

 

An increase in available tank storage capacity in excess of growth in demand for such storage in the key locations in which IMTT operates, such as New York Harbor and the lower Mississippi River, could result in overcapacity and a decline in storage rates and tankage volumes rented and could adversely affect IMTT’s revenues and profitability.

 

IMTT is subject to environmental, health and safety risks that may impact its future cash flows and profitability.

 

A number of the properties owned by IMTT have been subject to environmental contamination in the past and require remediation for which IMTT is liable. These remediation obligations exist principally at IMTT’s Bayonne and Lemont facilities and could cost more than anticipated or could be incurred earlier than anticipated or both. In addition, IMTT may discover additional environmental contamination at its Bayonne, Lemont or other facilities which may require remediation at significant cost to IMTT. Further, the past contamination of the properties owned by IMTT could also result in personal injury or property damage or similar claims by third parties.

 

IMTT’s operations are subject to numerous statutes, rules and regulations relating to environmental, health and safety protection that are complex, stringent and expensive to comply with. Although we believe that IMTT’s operations comply in all material respects with environmental, health and safety regulations,

failure to comply in the future may give rise to interruptions in IMTT’s operations and civil or criminal penalties and liabilities that could adversely affect IMTT’s business and financial condition. Further, these rules and regulations are subject to change and compliance with such changes could result in a restriction of IMTT’s business activities, significant capital expenditures and/or increased ongoing operating costs.

 

IMTT’s current debt facilities will need to be refinanced on amended terms and increased in size during 2006 and 2007 to provide the funding necessary for IMTT to fully pursue its expansion plans. The inability to refinance this debt on acceptable terms and to borrow additional amounts would have a material adverse effect on the business. Additionally, if interest rates or margins increase, the cost of servicing any refinancing debt will increase, reducing IMTT’s profitability and its ability to pay dividends to us.

 

IMTT’s current debt facilities will need to be refinanced on amended terms and increased in size during 2006 and 2007 to provide the funding necessary for IMTT to fully pursue its expansion plans. We cannot assure you that IMTT will be able to refinance its debt facilities on acceptable terms, including the loosening of certain restrictive covenants, or that IMTT will be able to expand the size of its debt facilities by an amount sufficient to cover the funding requirements of its expansion plans. If IMTT is unable to obtain sufficient additional financing, it will be unable to fully pursue its current expansion plans, its growth prospects and results of operations would be adversely affected and its distributions to us would decline from current levels. This would adversely affect our ability to make distributions to shareholders. Additionally, even if available, replacement debt facilities may only be available at substantially higher interest rates or margins or with substantially more restrictive covenants. Either event may limit the operational flexibility of IMTT and its ability to upstream dividends and distributions to us. If interest rates or margins increase, IMTT will pay higher rates of interest on any debt that it raises to refinance existing debt, thereby reducing its profitability and having an adverse impact on its ability to pay dividends to us and our ability to make distributions to shareholders.

 

IMTT’s business involves hazardous activities, is partly located in a region with a history of significant adverse weather events and is potentially a target for terrorist attacks. We cannot assure you that IMTT is, or will be in the future, adequately insured against all such risks.

 

The transportation, handling and storage of petroleum, chemical and V&A products are subject to the risk of spills, leakage, contamination, fires and explosions. Any of these events may result in loss of revenue, loss of reputation or goodwill, fines, penalties and other liabilities. In certain circumstances, such events could also require IMTT to halt or significantly alter operations at all or part of the facility at which the event occurred. Consistent with industry practice, IMTT carries insurance to protect against most of the accident-related risks involved in the conduct of the business; however, the limits of IMTT’s coverage mean IMTT cannot insure against all risks. In addition, because IMTT’s facilities are not insured against loss from terrorism, a terrorist attack that significantly damages one or more of IMTT’s major facilities would have a negative impact on IMTT’s future cash flow and profitability. Further, losses sustained by insurers during hurricanes Katrina and Rita may result in lower insurance coverage and increased insurance premiums for IMTT’s properties in Louisiana going forward, a situation that could worsen if future weather events cause significant property damage in the U.S. Gulf region.

 

Hurricane Katrina resulted in labor and materials shortages in the regions affected. This may have a negative impact on the cost and construction timeline of IMTT’s new storage facility in Louisiana, which could result in a loss of customer contracts and reduced revenues and profitability.

 

In the aftermath of hurricane Katrina, construction costs in the region affected by the hurricane have increased and labor shortages have been experienced. This could have a significant negative impact on the cost and construction schedule of IMTT’s new storage facility at Geismar in Louisiana. IMTT may not be fully compensated by customers for any such increase in construction costs. In addition, substantial construction delays could result in a loss of customer contracts with no compensation or inadequate compensation, which would have a material adverse effect on IMTT’s future cash flows and profitability.

Risks Related to Our Business

 

For a detailed discussion of the additional risks related to our business, please see “Risk Factors — Risks Related to Our Business” in Part I, Item 1A of our amended Annual Report on Form 10-K/A for the fiscal year ended December 31, 2005, filed with the SEC on October 16, 2006, which is incorporated by reference in this prospectus supplement.

 

We have only operated as a combined company since December 2004, during which time we have devoted significant resources to integrating our businesses, thereby diverting attention from strategic initiatives.

 

We completed our initial public offering and the acquisition of our initial businesses and investments in December 2004 and completed additional acquisitions for our airport services business and airport parking business during 2005. On May 1, 2006, we completed the acquisition of our 50% ownership interest in IMTT’s bulk liquid storage business. On June 7, 2006, we completed the acquisition of TGC, our gas production and distribution business in Hawaii. On July 11, 2006, we completed the acquisition of Trajen. With the exception of our district energy business, prior to our acquisition all of our businesses were privately owned and not subject to financial and disclosure requirements and controls applicable to U.S. public companies. We have expended significant time and resources throughout our operations to develop and implement effective systems and procedures, including accounting and financial reporting systems, in order to manage our operations on a combined basis as a consolidated U.S. public company. As a result, these businesses have been limited, and may continue to be limited, in their ability to pursue strategic operating initiatives and achieve our internal growth expectations. In addition, due to our short operating history as a consolidated U.S. public company, the performance of our consolidated business during its first year of operations may not be an accurate indicator of our prospects for future years.

 

Our businesses have substantial indebtedness, which could inhibit their operating flexibility.

 

As of June 30, 2006, on a consolidated basis, we had total long-term debt outstanding of $1,046.9 million, including $274.0 million outstanding under MIC Inc.’s acquisition credit facility. The amount outstanding under MIC Inc.’s acquisition credit facility and the amount outstanding under the NACH credit facility both increased by $180.0 million in the third quarter of 2006 to finance the Trajen acquisition. We repaid $76.45 million of outstanding borrowings under the MIC Inc. the acquisition credit facility with proceeds from the sale of our investment in MCG and a further $89.5 million of outstanding borrowings under the MIC Inc. acquisition credit facility with proceeds from the sale of our investment in SEW. After giving effect to this offering and the application of the net proceeds of the offering as described in “Use of Proceeds,” we will have consolidated total long-term debt outstanding of approximately $988.2 million, $35.2 million of which will be at the MIC Inc. level. This will be further reduced by the application of the net proceeds from the sale of our interest in YLL to repay in full the outstanding borrowings under MIC Inc.’s acquisition credit facility, which we expect will occur by the end of February 2007. The terms of our businesses’ debt generally require our businesses to comply with significant operating and financial covenants. The ability of each of our businesses to meet their respective debt service obligations and to repay their outstanding indebtedness will depend primarily upon cash produced by that business.

 

This indebtedness could have important consequences, including:

 

 

If we are unable to comply with the terms of any of our various debt agreements, we may be required to refinance a portion or all of the related debt or obtain additional financing. We may be unable to refinance or obtain additional financing because of our high levels of debt and debt incurrence restrictions under our debt agreements. We also may be forced to default on any of our various debt obligations if cash flow from the relevant operating business is insufficient and refinancing or additional financing is unavailable, and, as a result, the relevant debt holders may accelerate the maturity of their obligations.

 

Our Manager’s affiliation with Macquarie Bank Limited and the Macquarie Group may result in conflicts of interest.

 

Our Manager is an affiliate of Macquarie Bank Limited and a member of the Macquarie Group. From time to time, we have entered into, and in the future we may enter into, transactions and relationships involving Macquarie Bank Limited, its affiliates, or other members of the Macquarie Group. Such transactions have included and may include, among other things, the acquisition of businesses and investments from Macquarie Group members, the entry into debt facilities and derivative instruments with Macquarie Bank Limited serving as lender or counterparty, and financial advisory services provided to us by Macquarie Securities (USA) Inc. and other affiliates of Macquarie Bank Limited.

 

Although our audit committee, all of the members of which are independent directors, is required to approve of any related party transactions, including those involving Macquarie Bank Limited, its affiliates, or members of the Macquarie Group, the relationship of our Manager to Macquarie Bank Limited and the Macquarie Group may result in conflicts of interest.

 

We estimate that the net proceeds to us from this offering will be approximately $252.8 million (or approximately $290.9 million if the underwriters’ overallotment option is exercised in full) after deducting estimated underwriting discounts and commissions and estimated expenses of this offering. We intend to use the net proceeds from this offering, in addition to the net proceeds from our anticipated disposition of our interest in YLL, to repay borrowings under the acquisition credit facility of MIC Inc. incurred to finance the acquisition of our interests in IMTT, Trajen and TGC and any remaining amounts for general corporate purposes.

 

To fund acquisitions, capital expenditures and to a limited extent working capital, we amended and restated our acquisition credit agreement with Citicorp North America Inc. (as lender and administrative agent), Citibank, N.A., Merrill Lynch Capital Corporation, Credit Suisse, Cayman Islands Branch and Macquarie Bank Limited, pursuant to which they committed to provide, in the aggregate, financing of up to $480.0 million, consisting of a $300.0 million revolving credit facility and a term loan of $180.0 million through March 31, 2008 (the “acquisition credit facility”). The interest margin under the acquisition credit facility is LIBOR plus 2.00% or a base rate plus 1.00%, increasing by 0.50% on November 9, 2006 and again on May 9, 2007, up to a maximum of 3.00% and 2.00%, respectively. The current margin on outstanding borrowings is LIBOR plus 2.00%. Once the term loan borrowings have been repaid in full or the term loan commitments have otherwise terminated, the interest rate on the revolving portion of the acquisition credit facility will decrease to LIBOR plus 1.25% or the base rate plus 0.25%. Amounts borrowed and repaid under the term loan portion of the acquisition credit facility may not be reborrowed.

 

Our trust stock is listed on the New York Stock Exchange under the symbol “MIC.” On October 24, 2006, the last reported sale price of our trust stock on the New York Stock Exchange was $29.90 per share. The following table sets forth, for the periods indicated, the high and low sales prices of shares of our trust stock as reported on the New York Stock Exchange.

 

 

Our policy is to pay regular quarterly cash distributions on all outstanding shares. Our distribution policy is based on the predictable and stable cash flows of our businesses and investments and our intention to pay out, as distributions to our shareholders, the majority of our cash available for distribution and not to retain significant cash balances in excess of prudent reserves in our operating subsidiaries. If our strategy is successful, we expect to maintain and increase the level of our distributions to shareholders in the future.

 

The declaration and payment of any future distribution will be subject to a decision of the company’s board of directors, which will include a majority of independent directors. The company’s board of directors will take into account such matters as general business conditions, our financial condition, results of operations, capital requirements and any contractual, legal and regulatory restrictions on the payment of distributions by us to our shareholders or by our subsidiaries to us, and any other factors that the board of directors deems relevant. In particular, all of our businesses have substantial debt commitments, which must be satisfied before any of them can distribute dividends or make distributions to us. These factors could affect our ability to continue to make distributions.

 

The following table sets forth our unaudited pro forma capitalization, assuming no exercise of the underwriters’ overallotment option, at the public offering price of $29.50 per share of trust stock and the application of the estimated net proceeds of such sale (after deducting underwriting discounts and commissions and our estimated offering expenses). This table should be read in conjunction with “Use of Proceeds” and our consolidated financial statements and related notes included in our amended Annual Report on Form 10-K/A for the fiscal year ended December 31, 2005, filed with the SEC on October 16, 2006, and in our amended Quarterly Report on Form 10-Q/A for the quarter ended June 30, 2006, all of which are incorporated by reference in this prospectus supplement.

 

 

 

 

The selected financial data for Macquarie Infrastructure Company Trust include the results of operations, cash flow and balance sheet data of Atlantic Aviation FBO Inc. (formerly known as North America Capital Holding Company), or Atlantic FBO Holdco, which was deemed to be our predecessor. We have included the results of operations and cash flow data of Atlantic FBO Holdco for the years ended December 31, 2003 and 2002, for the period from January 1, 2004 through July 29, 2004 and for the period July 30, 2004 through December 22, 2004. The period from December 23, 2004 through December 31, 2004 includes the results of operations and cash flow data for our businesses and investments from December 23, 2004 through December 31, 2004 and the results of the company from April 13, 2004 through December 31, 2004. The year ended December 31, 2005 includes the full year of results for our consolidated group, with the results of businesses acquired during 2005 being included from their dates of acquisition. We have included the balance sheet data of Atlantic FBO Holdco at December 31, 2003, and our consolidated balance sheet data at December 31, 2004 and December 31, 2005. The selected financial data for the six months ended June 30, 2005 and as of and for the six months ended June 30, 2006 are derived from our unaudited consolidated financial statements for such periods and dates, included in our amended Quarterly Report on Form 10-Q/A for the quarterly period ended June 30, 2006, incorporated by reference in this prospectus supplement, which, in the opinion of management, contain all adjustments necessary for a fair presentation of the consolidated financial data. Our historical results are not necessarily indicative of the operating results that may be expected in the future. You should read the following information together with the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, including the notes thereto, included in our amended Annual Report on Form 10-K/A for the fiscal year ended December 31, 2005, filed with the SEC on October 16, 2006, and our amended Quarterly Report on Form 10-Q/A for the quarterly period ended June 30, 2006, all of which is incorporated by reference in this prospectus supplement.

 

The selected financial data for IMTT as at and for the years ended December 31, 2005, 2004 and 2003 are derived from the audited consolidated financial statements of IMTT Holdings, Inc. (formerly known as Loving Enterprises, Inc.), incorporated in this prospectus supplement by reference from our Current Report on Form 8-K/A filed with the SEC on May 16, 2006. The selected financial data for IMTT for the six months ended June 30, 2005 and as at and for the six months ended June 30, 2006 are derived from the unaudited consolidated financial statements of IMTT Holdings, Inc. We own 50% of IMTT and account for this business under the equity method of accounting.

 

The selected financial data for TGC as of April 30, 2006 and for the period from July 1, 2005 to April 30, 2006, and as of June 30, 2005 and 2004, and for the year ended June 30, 2005 and the period from August 8, 2003 (date of inception) to June 30, 2004, are derived from the audited consolidated financial statements of K-1 HGC Investment, LLC and subsidiaries, incorporated in this prospectus supplement by reference from our Current Report on Form 8-K/A filed with the SEC on June 27, 2006. The selected financial data for TGC for the six months ended June 30, 2005 and as at and for the six months ended June 30, 2006 are derived from our unaudited consolidated financial statements of TGC.

 

The selected financial data presented below represent the historical financial information for IMTT and TGC and do not reflect the accounting for these businesses upon completion of the acquisitions and the operation of the businesses as a consolidated entity. You should read this information with the financial statements and related notes, the unaudited condensed combined pro forma financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus supplement.

Macquarie Infrastructure Company Trust

 

 

 

IMTT