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Moody's downgrades Cintra's SH 130 tollway to junk bonds status

Category: Public Private Partnerships

Link to article here

A default or taxpayer bailout is looming...

Moody's downgrades SH130 toll road rating, fears default
By Robert Grattan
Austin Business Journal
October 17, 2013

Moody’s Investors Service Inc. has again downgraded the credit rating of SH 130 Concession Company LLC, based on what it said was inadequate traffic growth on the company’s 41-mile, tolled section of SH 130, the high-speed highway that runs around Austin parallel to I-35.

The road has been called an asset to economic development in towns along the route, such as Pflugerville, but has been hampered by what Moody's called "slow to moderate, yet inadequate" traffic growth. The credit rating agency expects that without a debt restructuring or additional investment, the Concession Company will be unable to meet its debt service payments due in June 2014, according to the rating report.

“Absent a sponsor injection of equity, a debt restructuring, or some other method of generating significant more revenues, there is a high likelihood of a payment default in June 2014,” the credit rating agency wrote.

The short-term implications of a default are unclear, Moody's wrote, but a continued payment default could lead the Texas Department of Transportation to terminate the concession agreement.

SH 130 is the first privately funded, built and operated state highway in Texas. The road is owned by the state, but operated and maintained by the Concession Company in keeping with a 50-year agreement worked out with TxDOT. The private company has been operating the road for 11 months after opening the route in October.

The majority owner of Concession Company is a unit of Madrid-based Ferrovial SA, according to a Bloomberg report.

The downgrade to a rating of Caa3 from B1 follows another downgrade on April 12 of this year.

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Read the San Antonio Express News article on it here.