A hypothetical Australian listed toll road motorway company called CROSSTRANS owns a 40-year road concession on a recently built 5-kilometre under-harbour Sydney Road and tunnel until 2062.

At the end of 2062, the road and tunnel ownership revert to the NSW State Government. (7 marks) Road tolls are increased at Price inflation according to CPI each year. The CROSSTRANS company has $6 billion in assets and $3 billion of bank debt maturing in various tranches between 2025 and 2035. Most of the debt is fixed-rate coupon bonds. CROSSTRANS recently reported annual motorway toll revenue of $300m, EBITDA of $200m and recently reported Net Profit After Tax of $4m. The annual interest expense is swapped and effectively is based on fixed rates until maturity and last year cost $120m per annum.

Using appropriate ratios, explain with reasons if the level of bank debt at CROSSTRANS is reasonable. (8 marks)