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I-69 project appears back on track with positive S&P outlook

The 21-mile highway project has faced repeated delays and disputes over the payment of subcontractors.

After years of delays for the Interstate 69 transportation project, ratings agency Standard & Poor's said its outlook is positive if the development consortium agrees to a memorandum of understanding to speed up construction.

PSP Investments and Isolux Corsan, the partners developing the $325 million highway construction project in Indiana, must complete the terms of a MOU to get the delayed project back on schedule and avoid future negative credit ratings. S&P said its BB- rating for the $243.8 million private activity bonds used to fund the project will remain, but the agency’s outlook is positive.

The MOU states I-69 Development Partners must pick up the pace of construction, provide $80.5 million of additional funding, extend project deadlines and resolve contractor payment disputes.

The I-69 Section 5 project involves the design, construction, financing, operation and maintenance of a 21-mile segment of Interstate 69, connecting Bloomington in southern Indiana to Martinsville further north.

The project was originally scheduled to be complete at the end of 2016, but “encountered a significant number of difficulties given its relative lack of complexity”, S&P stated. It is now expected to be finished on 31 May, 2018 – 19 months behind schedule.

From the start, I-69 Development Partners has experienced slow construction efforts and unresolved payment issues between Isolux Corsan and subcontractors. This is partly due to Isolux Corsan undergoing a restructuring while the I-69 project is under development.

The Spanish company’s efforts to stay in business have included divesting some of its subsidiaries, among them its road concessions business, which Canadian pension fund manager PSP Investments acquired in May and re-branded as ROADIS.

Last year, Fitch, another ratings agency, downgraded its outlook on I-69 Development Partners’ private activity bonds twice citing the same concerns S&P has.

If the MOU conditions are met and the project sticks to its new deadline, S&P said it believes “we could raise the rating one to two notches” in the near future.