Transurban Group announced on Monday that it has reached agreement with The Royal Bank of Scotland (RBS) to acquire all of RBS' senior secured debt exposure to the Cross City Tunnel (CCT) in Sydney for A$475 million, subject to regulatory approvals and final asset inspections.

In addition, in the event of material CCT traffic outperformance relative to Transurban's base case assumptions and if certain other conditions are satisfied, a further payment will be made to RBS over four years of up to A$27.5 million (year four nominal dollars).

The 2.1 kilometre CCT links Darling Harbour on the Western fringe of the Sydney CBD to Rushcutters Bay in the Eastern Suburbs. It also includes connections to the Eastern Distributor, in which Transurban holds a 75.1 % interest.

RBS is the CCT's sole senior secured creditor. In September 2013 receivers were appointed to oversee the CCT holding and operating entities and commence a sale process for the asset.

Transurban and RBS have agreed during this transitional process to instruct the receivers to continue with the sale process for the asset. Transurban intends to participate in the sale process. The outcome of that process will determine Transurban's future ownership interest, if any, in the asset, again subject to regulatory approvals.

If the conditions precedent to the debt acquisition are satisfied, Transurban will utilise corporate debt facilities to fund the debt acquisition. The transaction to acquire the debt would be expected to complete by the end of the 2013 calendar year, with conclusion of the asset sale process anticipated in early 2014.

Transurban CEO Scott Charlton said:

"The acquisition of the senior debt in the CCT will allow us to work with the receivers to examine restructuring options for the asset and ultimately, if successful in the sale process, put the asset onto a sustainable footing"."The CCT is reported to have cost its original owners $1 billion to finance and construct. As the CCT's sole secured creditor, we would be well positioned to unlock value for Transurban security holders from the asset and participate in the process to acquire the asset"."As asset owners on the Sydney orbital network we are focused on enhancing services to our customers and working with the RMS to improve the network more broadly".

A consortium of Bilfinger Berger, Deutsche Bank and Cheung Kong Infrastructure Holdings achieved a €520 million financial close and signed the concession agreements for the Cross City Tunnel in Sydney on 19 December 2002.

In June 2007, ABN AMRO, later taken over by Royal Bank of Scotland, (94%) and Leighton (6%) acquired the asset for $590 million.

The motorway commenced operations on 28 August 2005 and the concession expires 19 December 2035.