Alinda Capital Partners portfolio company and Detroit-Windsor Tunnel operator American Roads has filed for ‘Chapter 11’ protection.
American Roads in a New York bankruptcy court blamed a combination of its $830 million debt pile and reduced traffic volume across its business for its decision. Opened in 1930, Detroit-Windsor is a mile-long underwater tunnel linking the US and Canada.
The private toll road operator cited population decline in Detroit, which itself has opted for ‘Chapter 9’ protection, as a factor in its filing, noting traffic volume fell well short of its 2006 forecast.
Creditor Syncora Guarantee, a ‘monoline,’ or bond insurer, will own the company upon its exit from bankruptcy. Neal Belitsky, chief executive of American Roads, did not return a voicemail message seeking comment.
Macquarie Group founded American Roads in 2005 to operate the Detroit-Windsor Tunnel. In 2006, Syncora guaranteed a $500 million American Roads bond issuance.
By 2007, Alinda had acquired American, which also operates a toll bridge in Alabama, a US state, from Macquarie. Chris Beale, who in a spinout from Citigroup founded Alinda in 2005, did not respond to a request for comment.
Alinda, a $7.8 billion infrastructure fund manager based in Connecticut and London, is best known as an airport investor, with surface transportation making up a small portion of its business.
In a 2012 lawsuit involving Alinda and Macquarie, Syncora argued Macquarie had paid a consultant to present an inaccurate estimate about traffic volume for the Detroit-Windsor, which persuaded Syncora to insure American in its $500 million bond offering.
Alinda and American reached an agreement to discontinue the suit, but the case against Macquarie, alleging fraud, is proceeding.
A Macquarie spokeswoman said the fraud accusation was “entirely without merit,” adding the financial services provider would “defend its position to the fullest”.
Syncora has also brought legal action against California, Countrywide Financial, EMC Mortgage and UBS.