Mar. 3. By Dave Yochum. As expected, a long-troubled Cintra road project in Austin, Texas, has filed for bankruptcy protection because it is unable to make full payment on its senior debt.
SH 130 Concession Co. said in its bankruptcy filing that “the lingering effects of the recession” contributed to the filing.
The managed lanes project, around the eastern side of Austin, is oddly similar to the $650 million Cintra project that’s under way—and so widely vilified— between Charlotte and Lake Norman on I-77.
SH 130 has been in trouble for years.
In 2014 Texas newspapers were reporting that private toll operator Cintra was scrambling to avoid default on the first public private partnership in Texas. Cintra, a unit of Spain-based infrastructure conglomerate Ferrovial, was seeking to restructure more than $1 billion in debt and delay payments or face default.
Moody’s downgrade in 2013
In less than two years of operation, the 41-mile stretch which Gov. Rick Perry opened in October 2012 with much fanfare, was in “technical default,” according to Moody’s the debt-rating service. Indeed, Moody’s downgraded the SH 130 bonds in less than a year.
Anti-toll leaders like Kurt Naas, the founder of WidenI-77.org, have said North Carolina taxpayers are on the hook if the NCDOT-Cintra toll plan in Lake Norman doesn’t hold water.
Already, state legislators like Rep. John Bradford and Sen. Jeff Tarte are saying the 50-year deal between NCDOT, as well as Gov. McCrory and all of North Carolina, and Cintra is a disaster.
Moody’s said in 2014, while not in legal default, “the failure to meet the full payment that was originally scheduled for June 30, 2014 constitutes a default under Moody’s definition.”
The project sputtered forward in spite of the financial difficulties.
News Radio WOAI in San Antonio in 2014 quoted a spokeswoman this way: “A portion of the payment was made recently and the remainder is due in the future. As a result of the modification, as a matter of fact and as a matter of law, there is no default.”
Two years later, bankruptcy
SH 130 Concession Co. filed its bankruptcy petition Wednesday in Austin. It owes almost $1.3 billion in principal and more than $400 million in interest, expenses and fees.
Cintra, the company contracted to build toll lanes from Charlotte to Mooresville, owns 65 percent of SH 130 Concession Co.
Critics of the Austin toll project said the Texas Department of Transportation and the state bent over backwards to give the SH130 project every advantage. News Radio WOAI said the Texas DOT promoted “the highway throughout Austin and San Antonio, and even with those advantages, the project is struggling.”
“There are never going to be enough people in this state that have the kind of money to plunk down $7, $10, $12 a day in tolls to get around,” anti-toll activist Terri Hall told WOAI.
That was in July of 2014.
Nevertheless, last year the NCDOT stomped on the gas on the financial closing with Cintra, pushing it ahead of schedule, and locking in a 50-year agreement.
The agreement is ultimately with a company, Ferrovial, that has been vilified by people like Cornelius Town Commissioner Dave Gilroy, founder of Scale Finance, and politicians ranging from Mecklenburg County Commissioners Pat Cotham and Jim Puckett to Bradford, Tarte and NC Sen. David Curtis of Lincolnton, as well as the leadership of the Lake Norman business community, including the Lake Norman Chamber of Commerce.
US Department of Transporation weighs in before mayors visit
In July last year, the U.S. Department of Transportation wrote this in a Build America Investment Center report on SH130 in Texas: “Toll revenues generated on SH 130 Segments 5-6 since it opened in October 2012 have fallen well short of expectations, with revenue levels 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. 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.”
Despite all the problems with Texas’ first managed lane project, Mayors John Woods of Davidson and Chuck Travis visited toll road projects in the Dallas area last year, not Austin.
“My understanding is that they went with Cintra to see the tollroad that Cintra wanted them to see,” Gilroy said.
Although it was not shared in advance with Cornelius commissioners, Woods and Travis wrote this in an “Executive Summary” sent to Lake Norman media:
‘Astounded to learn’ of opposition here
“The [Dallas area] Chamber leadership was astounded to learn that businesses in our community would object to managed lanes, although they experienced some residents with anti-tolling positions based on concerns of double taxation, ‘Lexus Lanes’ concerns, regressive actions, etc. The Chamber also predicted that large employers exploring our market would turn away if the region didn’t offer transportation reliability to meet travel time expectations. They emphasized that they compete with the Charlotte region and this is a clear disadvantage to even retaining our existing large employers.”
The Cornelius Town Commission has voted 5-0 to oppose the Cintra deal.
Yesterday, the N.C. Department of Transportation announced that Secretary Nick Tennyson will go to Texas to gather more information.
Travis said he paid his own way to visit the toll project in Dallas. Travis said he was appointed to the North Carolina Turnpike Authority by former NC Speaker of the House Thom Tillis. In a press release Nov. 16, Travis said: “I feel it is important to have representation for our region, especially if the Managed Lane project continues moving forward. To date, there has minimal discussion regarding the I-77 Managed Lanes project.”
