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One of Cintra’s 3 Texas toll roads files for bankruptcy

The president of the North Dallas Chamber of Commerce, who recently spoke in favor of the North Carolina Department of Transportation’s toll-lane project along Interstate 77, said the Chapter 11 bankruptcy filing last week of the developer’s sister company in Texas has not changed his view.

Bruce Bradford, who visited Charlotte in January to support the Charlotte Regional Transportation Planning Organization’s decision to continue with a managed-lane strategy, said similar projects run by subsidiaries of Spanish developer Cintra Infraestructuras have been successful.

Cintra, whose I-77 Mobility Partners unit has a $650 million contract with  the N.C. DOT to build the toll lanes from Charlotte to Mooresville, runs three managed-lane projects in Texas: the LBJ Express in Dallas, the North Tarrant Express in Fort Worth, and Texas 130, which runs southeast of Austin.

SH130 Concession Co., the Cintra unit that built and operates the 41 miles of toll lanes on Texas Highway 130, cited lower-than-expected revenue in its bankruptcy filing. The company has a 50-year agreement with the Texas Department of Transportation to operate the lanes, which opened in 2012.

‘The middle of nowhere’

Bradford said that project was “built out in the middle of nowhere,” and was subject to poor timing, with the project launching just before the recession began.

He said the LBJ Express managed-lane project, which opened three months early in September, is popular with drivers.

“I see every ilk using it. From high-end cars to pick-up trucks and vans,” Bradford said.

He said public-private partnerships like the one Charlotte has with I-77 Mobility Partners are a good deal, because the financial risks of the project fall largely on the back of the equity holders investing in the project.

“If the structure is similar in Charlotte to that of LBJ Express and Tarrant Express, my expectation would be that the taxpayer got a good deal,” he said.

Even if the developer defaulted on its debt, “At the end of the day, you’d still have a road installed for less than what the state would have paid to build it,” Bradford said.

I-77 Mobility Partners said SH130 Concession’s bankruptcy will not affect the Charlotte project, which calls for the construction of one toll lane in each direction from the Brookshire Freeway to Exit 36 in Iredell County and the conversion of the existing high-occupancy vehicle lane between Brookshire and Exit 28 into a toll lane.

“The filing by the SH 130 Concession Co. has no financial impact on I-77 Mobility Partners, or the construction and operation of the I-77 express lanes,” said spokeswoman Jean Leier. “While Cintra is an equity sponsor of both projects, each project maintains a separate financial structure.”

She added that the recent news has not impacted I-77 Mobility Partners’ construction schedule. The company began clearing land and grading in November.

SH130 Concession, which is majority-owned by Cintra in partnership with Zachry Construction Co. of San Antonio, said that traffic on the toll road increased 15 percent last year. But that still wasn’t enough to combat the “lingering effects of the recession” that caused volume to be lower than originally projected. Subsequently, the company said it couldn’t meet its senior debt obligations.

Texas not liable

SH130 Concession said Chapter 11 protection gives it time to address the debt issue and continue discussions with lenders to improve the project’s capital structure.

“To minimize any loss of value to their businesses, the debtors’ immediate objective is to engage in business as usual,” according to a filing in its bankruptcy case.

According to the filing, the company owes more than $1.2 billion, including $721 million to BNP Paribas, the administrative agent for its first-lien lender, Banco Santander. In addition, it owes $551 million to the U.S. government for a loan obtained from the Transportation Infrastructure Finance and Innovation Act program and roughly $2 million in unsecured debt.

SH130 Concession said its bankruptcy filing would have no financial impact on the state of Texas because taxpayers there didn’t contribute to the project’s $1.3 billion price tag. They are not liable for any of the company’s outstanding debt, the company said.

SH130 Concession is not the first Cintra subsidiary in the U.S. to seek bankruptcy protection.

ITR Concession Co. filed for Chapter 11 relief in late 2014, citing a recession-related drop in interstate trucking on the Indiana Toll Road. The company, which Cintra owned with Macquarie Infrastructure Group, had $6 billion in debt.

IFM Investors purchased ITR Concession in May for $5.75 billion, a move that gave the pension fund manager the rights to the toll road’s revenue over the next 66 years.

N.C. reassessing

N.C. DOT Secretary Nick Tennyson, ordered last week by Gov. Pat McCrory to “reassess” the state’s contract with Cintra, was scheduled to meet Monday with Texas transportation officials in Austin. He said in a short press release that the N.C. DOT was directed to “review every available option—both legal and financial—to reassess the I-77 Mobility Partners’ business model and current contract.”

Provisions in the N.C. DOT contract call for about $95 million in taxpayer funds. Cintra will be responsible for the remainder, including $189 million in federal loans, $100 million in bond proceeds and $250 million in private equity. In addition, N.C. DOT will pay Cintra “up to $75 million if toll revenue is dramatically less than project estimates.”

Tennyson said in the press release that the agreement with Cintra, signed in May, “protects taxpayers from financial losses.”

The N.C. DOT’s website says that “the state’s liability is zero” in any situation involving developer bankruptcy.

But if the developer defaults without filing for bankruptcy, the state is required to pay.

According to an April 2014 report from the DOT to the state’s Joint Legislative Commission on Governmental Operations, “In the unlikely case of an incurable developer default, and if the lenders to the project are unable to bring in a replacement developer, NCDOT would be responsible for termination compensation in the amount of the lesser of (a) 80 percent of senior debt or (b) fair market value less NCDOT’s damages from the default.”

N.C. DOT spokeswoman Jordan-Ashley Walker said last summer that I-77 Mobility Partners would then use state funds to repay the company’s lenders. She said the project’s lenders, in the case of developer default, have an incentive to find a replacement developer. Otherwise, they would lose 20 percent of their principal.

“This is an added layer of protection for the department,” Walker said.

Seeking further explanation on what Tennyson meant when he said last week that the contract protected taxpayers, Walker said in an email that the N.C. DOT would use future toll revenue to pay outstanding project debt.

N.C. DOT’s 50-year contract with Cintra has come under heavy fire from local residents and state and local officials. They have called the toll lanes elitist and criticized provisions that require taxpayers to compensate I-77 Mobility Partners for any lost revenue should the state add general purpose lanes in the future.

Following public protests and demands that the contract be canceled, a review by the Office of the State Auditor concluded that North Carolina could be forced to pay Cintra between $80 million and $300 million for cancelling the contract without cause.

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