UPDATE 2-Biggest Macquarie fund latest to eye break with group

* Macquarie fund considering splitting in two

* May drop Macquarie as manager of the fund

* Fund posts net loss of A$1.7 billion on asset writedowns

* Shares fall on debt concern, lack of solid restructure plan (Add analyst comments, byline)

MELBOURNE/SYDNEY, Aug 20 - Macquarie Infrastructure Group (MIG) <MIG.AX>, one of the world's biggest toll-road operators, is considering dropping Macquarie Group <MQG.AX> as its manager, in the latest blow to the group's pioneering listed funds model.

MIG, the biggest of the Macquarie specialist listed funds, said on Thursday it may split into two units in a restructuring aimed at boosting its share price that it believes does not reflect fair value.

But its shares fell a further 6 percent after the plan, which would make it the fourth fund to break with Macquarie Group, failed to address its debt burden.

"It's quite a good move because it will allow existing investors to decide which suite of assets they are happy remaining investors in," said Will Seddon, investment analyst at White Funds Management.

"But to the extent that it doesn't do anything to directly improve the debt situation within the group, I think people don't like it and that probably explains the bulk of the share price move today."

MIG Chairman Mark Johnson said splitting into two separate vehicles appeared to be the best alternative to close a gap between its share price and asset values.

"Although no final decision has been made, it is likely that the portfolio would be split on the basis of risk/return profiles, including addressing management arrangements," he said in a statement.

MIG's assets include the UK's M6 toll road, the Westlink road in Sydney, Australia, and the 407 ETR in Toronto, Canada.

PIONEER

Macquarie Group's listed funds model, which it pioneered in the early 1990s, has been under pressure in the global financial crisis as the funds, some highly geared, struggled with plunging asset values and higher debt servicing costs.

The group's listed and unlisted funds jointly manage about A$160 billion ($130 billion) in airports, toll roads, real estate and other assets. MIG and Macquarie Airports <MAP.AX> are the top two funds in the group.

In June, Macquarie Leisure Trust Group <MLE.AX> moved to cut ties with Macquarie Group, while Macquarie Airports said in July it would manage itself. Macquarie Communications Infrastructure Group <MCG.AX> was taken over by the Canada Pension Plan Investment Board in June.

The changes come even as Macquarie Group is seeking to expand its asset management business. It said on Wednesday it had agreed to buy U.S. asset manager Delaware Investments for $428 million in cash from Lincoln National Corp <LNC.N>. [ID:nSYD484833].

MIG shares were down 6.6 percent at A$1.35 at 0458 GMT, compared with a 0.3 percent gain in the S&P/ASX 200 index <.AXJO>. Macquarie Group shares were up 0.8 percent.

MIG's net asset backing value per share as of June 30 was A$2.54, which is 43 percent higher than the stock's Wednesday's close of A$1.45.

"We see the proposed restructuring measures as likely to disappoint the market, which we believe was looking for something more substantial to reduce the valuation gap," Credit Suisse said in a note on Thursday.

MIG said other means of reducing debt were not attractive, with asset sales unlikely to fetch high enough prices, while raising capital would be dilutive to security holders.

For the year to June, MIG posted a net loss of A$1.7 billion after revaluations to its portfolio of road assets, though EBITDA rose to A$881.9 million from A$876.7 million a year ago.

MIG's net debt/EBITDA (earnings before interest, tax, depreciation and amortisation) ratio stands at 14.4, more than double the average of 6.9 times among its global peers, Merrill Lynch said in a report last month.