The Texas Department of Transportation (TxDOT) has signed a development contract for a $2.7 billion toll road expansion project known as the “New LBJ”, marking a significant financial milestone during a year when many industry insiders predicted only deals less than $1 billion in size would be possible.
The financing, made possible in part by an $800 million loan from the government’s infrastructure lending program known as TIFIA (Transportation Infrastructure Finance and Innovation Act), is set to close later this fall, according to a government official familiar with the financing.
LBJ I-635: awaiting
It is the second-largest TIFIA loan ever made during the program’s 11-year history and the third loan during this calendar year. The other two projects funded by TIFIA this year, the I-595 corridor improvement in Florida and the Triangle Expressway project in North Carolina, were also billion-plus projects, a further indication of the lending program’s critical role in bringing large-scale projects to fruition this year.
A fourth TIFIA-backed development, the $1 billion Port of Miami Tunnel project, is on schedule to reach financial close by the end of the month, the person said.
The publicly disclosed financing plan for the New LBJ also includes a $400 million offering of Private Activity Bonds, municipal debt securities whose proceeds are used to finance qualifying projects backed by the private sector.
A $400 million senior term facility completes the project’s $1.6 billion debt package, which will be repaid over 41 years at a cost of $861 million in interest, according to a financial disclosure made by TxDOT.
On the equity side of the financing, the LBJ Infrastructure Group, the international consortium of investors which was conditionally awarded the 52-year concession earlier this year, will provide $598 million toward the project. The consortium includes Spanish toll road developer Cintra and European infrastructure fund Meridiam as maximum equity contributors of 45 percent and 55 percent, respectively, according to a TxDOT spokesperson. Additionally, the Dallas Police and Fire Pension System can have a maximum equity participation of up to 10 percent, the spokesperson said.
The state of Texas is also contributing a $445 million grant toward the project, which will provide approximately $4 billion of needed infrastructure to the Dallas area, according to a TxDOT press release. That includes about $1.3 billion of maintenance and operations investment over the life of the concession, the spokesperson said.
The project involves financing, designing and constructing the 13-mile LBJ I-635 corridor expansion in North Texas. The expansion will rebuild the eight existing lanes of freeway and add six managed toll lanes, which feature a variable toll that rises and falls with traffic levels in order to maintain the highway’s speed at 50 miles per hour.
Construction is expected to begin by mid-2011 and open to traffic in late 2016. The project has been in procurement since 2005, according to a project procurement website run by TxDOT.
It is the second major privately-backed highway development executed by TxDOT this year. In June, the department executed a contract for the $2 billion development of the North Tarrant Express highway in northern Texas, which was also awarded to a consortium backed by Cintra and Meridiam.
Macquarie Capital is acting as financial adviser to the LBJ Infrastructure Group.