Texas Toll Road Vendor Bankruptcy Triggers NCDOT Review of I-77 Contract

AASHTO Journal, 4 March 2016

North Carolina Department of Transportation Secretary Nick Tennyson said he had been directed by Gov. Pat McCrory to reassess the business model for a private partner of a Charlotte toll road project, after the operator of the SH 130 tollway in Texas filed for Chapter 11 bankruptcy protection.

Both the Texas operator and the company that would build toll lanes on Interstate 77 in Charlotte, I-77 Mobility Partners, are units of Spanish-owned Cintra US.

In a March 2 statement, Tennyson said: “Late today, we were notified of the bankruptcy filing in Texas. The governor has directed us to immediately review every available option – both legal and financial – to reassess the I-77 Mobility Partner’s business model and current contract.

tennyson.jpg Tennyson

“Therefore, I will be going to Austin on Monday [March 7] to meet with Texas DOT representatives to assess the situation. It is important to note that the current contract protects taxpayers from financial losses.”

WBTV in Raleigh, N.C., reported that SH 130 Concession Co. was the second Cintra project to seek bankruptcy protection in the past 18 months. WBTV and other North Carolina news services said opponents of the 26-mile, $662 million I-77 toll lanes project hoped the state would cancel it.

The Charlotte toll road vendor issued a statement saying the Texas filing “has no financial impact on I-77 Mobility Partners LLC, or the construction and operation of the I-77 Express Lanes. While Cintra is an equity sponsor of both projects, each project maintains a separate financial structure. This matter has not impacted our construction schedule and we look forward to continuing our work here in North Carolina.”

SH 130 Concession Co. said in a news release that it “filed for Chapter 11 protection in order to address its outstanding debt obligations.”

It also said it “will continue discussions with its lenders to improve the capital structure of the project for the long term” and “hopes to be able to announce a resolution in the coming months.

Meanwhile, the company said, it will “continue to operate and serve its customers on an uninterrupted basis as it moves forward with this process.”

Its CEO, Alfonso Orol, also said the filing “will have no financial impact on the state of Texas. It’s business as usual for our customers, employees, vendors, and surrounding communities during these proceedings.”

The company said the Texas DOT contributed no money to build the SH 130 toll project and “and is not liable for any of SH 130 Concession Company’s outstanding debt, money that was used to finance construction. The state owns the 41-mile southern section of the SH 130 facility and leases the right to operate and maintain it through its Facility Concession Agreement with SH 130 Concession Co. This agreement remains in place and will continue to protect the public interest during these proceedings.”

Orol said while traffic on the Texas toll road is growing, “the challenges that the project has experienced during its early years have made the current debt payment schedule unsustainable.”

Cintra issued a statement as well, to both address its Texas situation and emphasize that the financial situation of one project does not affect another.

“Each of Cintra’s projects is wholly independent,” it said, “with an isolated financial structure that ensures that the performance of one project never impacts the operations of another concession in which Cintra invests.”

Cintra said the Chapter 11 filing by SH 130 Concession, in which Cintra is the majority shareholder, “will have no impact on the state of Texas, local drivers, toll road employees, or any other project in which Cintra invests worldwide,” it said. “No state money was used to pay for the $1.4 billion construction cost of SH 130 segments 5 and 6, and the state is not liable for the project’s debt.”

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