Downgrade for Texas toll P3

Moody’s has downgraded SH 130 to junk bond status. The agency says low traffic volume has resulted in lower than expected revenue.

The reputation of a much-criticised toll road deal in Austin, Texas has taken a further hit.

The latest salvo to be visited upon the State Highway 130 (SH 130) public-private partnership (PPP; P3) has implications for its bottom line: bond credit rating agency Moody’s Investors Service has downgraded ‘SH 130 Concession Company,’ the private partner in the $1.3 billion transaction.

Moody’s lowered its rating on the company – majority-owned by private toll road operator Cintra – from B1 to Caa3. The markdown follows a downgrade earlier in April, and reduces SH 130 Concession Company to junk bond status. Cintra is 65 percent-owner of the company with privately held Texas concern Zachary Corporation owning the remaining 35 percent. 

The project has debt of $1.1 billion – a $686 million senior bank facility led by Banco Santander with Banco Espirito Santo, Caixa-Banco de Investimento, Caja Madrid and Fortis Bank, as well as a subordinate $483 million loan via TIFIA, or the Transportation Infrastructure Finance and Innovation Act.

Moody’s said the PPP will have insufficient capital to meet its debt service payment in June 2014. The agency blamed low traffic volume on the toll road for failing to produce adequate revenue.

SH 130 is a four lane, 91-mile road east and south of Austin. The design, build, finance, operate and maintain (DBFOM) concession with Cintra, finalised in 2007, centred on a 41-mile segment of SH 130. The P3 has a 52-year lease, the maximum term allowed under Texas law.

The SH 130 P3 opened to traffic in the fall of 2012, but has been politically unpopular in Texas.