Tom Warne Report, 29 September 2014
Land Line Magazine – September 17, 2014
Indiana – Two private, foreign corporations that took over the Indiana Toll Road in 2006 have filed for Chapter 11 bankruptcy. It was sold to Spanish Infrastructure company Cintra and Australia-based Macquarie by former Indiana Gov. Mitch Daniels in a 75-year, $3.8 billion lease deal. Indiana used the money from the contract to build other highway projects.
Toll rates were immediately doubled when Cintra and Macquarie acquired the tollway, but the revenue was not enough to repay the $5.8 billion in debt still owed on the project. The hedge fund and distressed debt investors that currently own about 80% of the debt have decided to allow Cintra and Macquarie to restructure their debt or try to sell to another company.
Many fear the next to file for bankruptcy will be Cintra’s Texas State Highway 130, which opened in 2012 after the Indiana Toll Road was already in financial trouble. In June, Cintra was placed in ‘technical default’ for failing to make its full debt service payment. Taxpayers will be liable if that tollway goes under, because Cintra and its minority partner, San Antonio-based Zachry American Infrastructure used a $430 million federal TIFIA loan as part of the $1.3-billion debt package. If Cintra-Zachry fails to pay its next debt service, they will land in bankruptcy as well.
Cintra has two additional P3’s in Texas that are also facing a grim outlook in their debt risk, the I-635 contract in Dallas and the North Tarrant Express in Ft. Worth.
I’m not close enough to this situation to know exactly what’s happening, but, I’ve been involved with others enough to know the delicate balance between toll rates and toll avoidance. There is a tipping point at which toll payers are willing to find ways around the facility rather than pay. I particularly hear this from the trucking industry representatives who have not found an easy way to pass on the costs of tolls to their customers.