Report: SH 130 Toll Road Company in Danger of Default
By Aman Batheja
June 19, 2014
The company behind a privately operated Texas toll road that sports the country’s fastest speed limit is dangerously close to defaulting on its debt, according to a credit rating agency.
According to a report released this week by Moody’s Investors Service, the SH 130 Concession Company, which operates the 41-mile southern portion of State Highway 130, is low on cash and scrambling to get an upcoming payment deadline waived,
The private consortium behind the project owes more than $1 billion and lacks the funding to pay off an upcoming debt payment due on June 30, according to the report. The report adds that the company has “depleted all but $3.3 million of available liquidity reserves.”
In an emailed statement, SH 130 Concession Company spokeswoman Megan Compton did not dispute any of the findings in the Moody's report.
"We remain committed to our long-term investment in SH 130 and are confident that this first-class roadway will play an increasingly important role in relieving congestion along the gridlocked I-35 corridor as Central Texas continues to grow,” Compton said.
The southern portion of SH 130 between Austin and Seguin opened in October 2012 to much fanfare. Along with boasting an 85 mph speed limit, the fastest in the country, the SH 130 Concession Company had signed a first-of-its-kind-in-Texas deal to build and operate the toll road for 50 years in exchange for a portion of the toll revenue.
Yet the company’s projections for traffic and toll revenue were overly optimistic. In October, Moody’s downgraded $1.1 billion of debt tied to the project by five notches, from B1 to Caa3, considered junk status. The financial situation has not markedly improved, according to the rating agency’s latest report.
“Fiscal 2013 revenue performance was about 60 percent below original forecast and fiscal 2014 is likely to be 70 percent below the original forecast,” the report states.
Company officials are working with the project’s lenders on waiving a portion of this month’s debt payment while not triggering an official default, according to the report. The company is also attempting to restructure its debt based on a new traffic and revenue study, according to the report.
SH 130 was designed to allow drivers a route to travel through San Antonio and Austin and avoid the traffic on Interstate 35. The consortium spent $1.3 billion to build the southern portion of SH 130, known as Segments 5 and 6. The northern portion (Segments 1-4) is publicly funded.
State officials have expressed hope that the road will someday relieve congestion from Interstate 35, particularly trucks for Mexico passing through the region and headed north. Company officials have also predicted that future development in small towns along the toll road’s route would boost traffic over the life of its 50-year contract.
For most of 2013, TxDOT subsidized trucks to use the road at a discounted rate. That turned out to be a lasting boost to the road’s performance as commercial traffic levels have not dropped since the discount ceased, according to Moody’s.
“Commercial traffic levels have held since the discount ceased and with the strengthening credit profile of Mexico … commercial traffic along SH 130 is likely to grow over the long-term,” the report states.
Link to article here.
SH 130 tollway, now deep in debt, seeks refinancing deal
By Robert Grattan
Austin Business Journal
June 23, 2014
The tollway company that built a section of State Highway 130 is negotiating with several banks in order to refinance much its debt, according to a report by a debt rating agency.
SH 130 Concession Company borrowed $1.18 billion to build the road and was projected by Moody's Investor Service to not be able to make its June 30 debt payments after seeing revenue reach only about 30 percent of original projections. Still, with a refinancing deal in the works with banks that lent the money, default is unlikely, the Austin American-Statesman reported.
The concession company is a partnership of Spanish company Cintra and San Antonio's Zachry Construction Co. 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 Concession Company in keeping with a 50-year agreement worked out with the Texas Department of Transportation.
SH 130 has been cited as an economic development driver for the cities east of Austin. However, the despite the high speed limit and traffic free drive, the road hasn't met revenue expectations.
A company spokeswoman told the Statesman that the road would play an important part in Central Texas as an alternative to the congested I-35.
SH 130 Concession Co.'s debt was not downgraded by the recent Moody's report, though Moody's has lowered its grade in the past.
In its report, Moody's indicated TxDOT could take over the highway in the event of an extended relief event such as a default by paying "a senior debt termination amount." It wasn't clear how much that amount would be, the Statesman reported.