The concession company responsible for operating Texas’ State Highway 130 (SH130) has filed for bankruptcy protection after more than four years of lower-than-expected traffic volumes.
The unit, in which Cintra owns 65 percent and Zachry American Infrastructure holds the remaining share, said in a recent statement that the Chapter 11 filing will not affect drivers, employees, vendors or suppliers nor will it impact Texas’ finances.
The company is in the process of negotiating with its lenders “to improve the capital structure of the project for the long term”. It hopes to announce a resolution in the coming months, according to the statement.
SH130 is a 91-mile, four-lane toll road east and south of Austin, Texas. Cintra and Zachry financed, developed and built Sections 5 and 6, which span 41 miles, covering the southernmost section of the highway and making it the first toll road in the state to be delivered as a PPP.
The four northern segments of SH130 were developed by the Texas Department of Transportation (TxDOT) through design-build contracts.
The Cintra-Zachry joint venture invested $1.35 billion in the project. It was awarded a 50-year concession agreement to operate and maintain it.
“Traffic on SH130 has increased every year since the facility opened in 2012, including a 15 percent year-over-year increase in 2015,” the concession company said in the statement. “However, traffic has not met original expectations due to the lingering effects of the recession, which reduced traffic volumes regionally during the project’s early years and delayed development along the largely rural SH130 corridor.”
According to the US Department of Transportation’s (USDOT) Build America Transportation Investment Centre (BATIC), revenue levels generated by SH130 were more than 60 percent below the original forecast for the highway.
“As a result, the concessionaire has fully drawn down the bank liquidity facility, and ratings on the outstanding debt for the project (including the bank debt and the TIFIA loan) have been downgraded to Caa3 by Moody’s,” according to a BATIC post dated July 17, 2015.
“The concession company negotiated with its senior bank lenders to largely postpone its June 2014 interest payment to January 2016, avoiding a legal default; however, it appears likely that financial restructuring of the project will ultimately be required.”
Lower-than-expected revenues were also cited as the reason behind the bankruptcy of the Indiana Toll Road Concession Company (ITRCC). Backed by Macquarie Atlas Roads, Macquarie Infrastructure and Cintra, ITRCC declared bankruptcy in September 2014.
Last March, Australian fund manager IFM Investors picked up ITRCC, which has 66 years remaining on its original 75-year concession agreement, for $5.7 billion. The deal is IFM’s largest overseas investment to date.