Spanish toll co. set to run North Meck’s I-77 goes BANKRUPT running Indiana road
GOP leaders from Thom Tillis to Skip Stam to Pat McCrory have bent over backwards to tell us what a great idea privately-managed toll roads are. Yet, events in Indiana last week should serve as a dire warning for North Carolinians:
The debt-stricken operator of the Indiana Toll Road filed for bankruptcy protection Sunday with a plan to restructure some $6 billion in debt, the latest example of a private investment in public infrastructure that failed to meet expectations.
ITR Concession Co. LLC filed for Chapter 11 protection in U.S. Bankruptcy Court in Chicago with a prepackaged plan backed by a majority of its creditors that proposes selling its assets or reorganizing its business.
Indiana Gov. Mike Pence said in a statement Monday that “Hoosiers can expect business as usual” on the 157-mile road, a main artery through the state. The bankruptcy isn’t expected to affect the operator’s 283 employees, the company said.
ITR Concession, owned by units of Spanish infrastructure company Ferrovial and Australian investment bank Macquarie Group Ltd. , said it would follow a two-track restructuring process. In a declaration filed with the bankruptcy court, Chief Executive Fernando Redondo said the company intends to pursue a sale of the toll road’s assets at a bankruptcy auction, with the proceeds earmarked for creditors. The sale process has a deadline of Aug. 1, 2015.
For those of you keeping score at home, Ferrovial is the parent company of Cintra — which is close to finalizing a deal with North Carolina state government to manage toll lanes on North Mecklenburg County’s I-77.
[…]Alternatively, senior creditors will swap their stakes for a 95.75% stake in a reorganized ITR Concession Co. Holdings LLC. Under that plan, the existing lenders have agreed to lend $2.75 billion to the new company to aid the reorganization.
The 58-year-old road, which runs across Indiana between the Ohio Turnpike and Chicago Skyway, has struggled for years with a heavy debt load and lower-than-expected traffic.
In 2006, a Macquarie subsidiary and Ferrovial affiliate Cintra Infraestructuras paid $3.8 billion to Indiana for the right to operate the road for 75 years. The winning bid brought in twice the value that state-paid consultants had calculated for the lease, state records show.
ITR has since pumped $458 million into improving the toll road, Mr. Redondo said in a court filing, but a drop in interstate commerce following the global recession dampened revenue on the trucking-heavy route.
Last year, ITR generated $158 million in earnings before interest, tax, depreciation and amortization but paid approximately $193 million to service its debt, filings show. In June, the company missed a $102 million interest payment, which helped accelerate restructuring talks with hedge funds that bought the road’s bank debt.
ITR’s secured debts include $2.15 billion owed on terminated “swap” transactions set up to hedge against interest rate fluctuations, as well as $3.85 billion in first-lien syndicated bank debt. Its restructuring plan has the support of more than 87% of debtholders in amount and 89% in number, court papers show.
A number of other toll roads backed by private financing have struggled in recent years. American Roads LLC, which operates toll roads in Alabama and Michigan, restructured its debt through Chapter 11 last year.
In June, the Portuguese operator of the Northwest Parkway in Denver tapped restructuring advisers in the face of a high debt load. In 2011, San Diego’s South Bay Expressway, built by a company owned by a Macquarie-managed investment fund, exited bankruptcy protection under a plan that wiped hundreds of millions of dollars of debt from its balance sheet.
[…]
Again — THIS is THE SAME crowd that our state’s leaders are trying to sign over management of stretches of I-77 to. The brakes need to be applied to this deal. In light of recent history in other states, this “experiment” with taxpayer dollars and assets needs to be seriously rethought.
The reason they went bankrupt is because people stopped using toll roads due to the cost. We were traveling cross country and went through Indiana and set our GPS to avoid tolls. The GPS took us off and on and several times moved us to the right-hand lane to avoid tolls. It is programmed in a Garmen to take the same routes but come off the toll road when you get to a toll plaza.
No need for concern. You see, our GOP leaders in Raleigh have taken steps to make certain that the toll road scheme can maintain through extraordinary means. The NC Legislature and our Republican Governor thought it wise to RAISE the level of direct investment of State Employee Retirement monies into Private investments. Even though we, at the time of passage, did not invest nearly the allotted percentage in such investments, our Republicans gave Janet Cowell the singular power of control over billions in State Employee Retirement funds.
http://www.carolinajournal.com/exclusives/display_exclusive.html?id=10392
Think on that for just a moment. The GOP gave control of even more retirement funds for direct investment to Democrat Janet Cowell. Janet has already run State Employee Retirement funds to being underfunded (approx. only 85% funded). Not only has the GOP bailed out Janet and State Employees at the expense of all NC taxpayers without even a Thank You, but they have now given her more power to further place retirement monies at risk on the backs of you and me.
The GOP did everything it could to help ensure the reelection of Cowell over Steve Royal two years ago. They helped Royal not one bit and even approached him to step away from his nomination over Frank Roche through ludicrous racism claims. They failed in their attempts to dirty Royal, but they hung him out to dry, nonetheless.
Why? Because Steve was not a Crony Capitalist. Janet, the GOP leadership, as well as our Governor ARE, All of them, taking their lead from Europe and South America on funding of public works projects. It’s been in development for some time. Take a look at this report and see for yourself. Here is an excerpt:
“But with the emergence of public-private
partnerships (PPPs) for such traditionally government-run assets as airports and highways, U.S.
pension funds have an additional target for equity investments.
Some public employee unions have raised concerns about their pension funds investing in
infrastructure, due to their ideological opposition to PPPs. Because these pension funds are taxexempt,
they typically do not buy tax-exempt bonds, such as those typically issued by public-sector
airports and toll roads. And since there is no equity in state-owned infrastructure, the only way to
invest equity in infrastructure is with investor-owned infrastructure. As noted above, that has
generally meant electric and gas utilities, some water utilities, pipelines, etc. But now that PPP
airports, seaports and toll roads exist, transportation infrastructure has been added to the list of
potential pension fund equity investments in infrastructure.” http://reason.org/files/transportation_annual_privatization_report_2011.pdf
Has Janet already made such investments in Cintra to safeguard this failing idea? Well, it’s hard to tell given the secrecy in which she operates. http://www.bloomberg.com/news/2014-06-26/secrecy-in-pensions-triggers-legislative-brawl-in-north-carolina.html
….From Bloomberg….”In a legislature that has used its veto-proof Republican majority to pursue an agenda of tax and service cuts that set off weekly protests at the statehouse, the pension battle is striking for its bipartisanship.
Republicans are the majority of primary sponsors for both the bill backed by Cowell and the union-supported disclosure bill she opposes. Only the treasurer’s bill is moving forward so far. Governor Pat McCrory, a Republican, doesn’t comment on pending legislation, said Rick Martinez, a spokesman.
The five-year period of secrecy the treasurer supports would mean the statute of limitations for securities fraud claims would expire before documents are made public, said the employees association’s general counsel, Tom Harris.”
Every single time these clowns in the GOP strike a “Bipartisanship” arrangement you can count on the public getting screwed.
I cannot prove today that NC is funneling money from retirement accounts through hedge funds and into Cintra (which would be legal now), but off the record comments to me by people in Raleigh close to Treasury say that is exactly what the new legislation was going to enable. As hard as it may be to believe your elected officials would do such a thing in darkness, remember it is their cronies they are covering……and at ALL tax payers’ expense.
Finally, here’s one more article you won’t see in Mainstream Media concerning Janet Cowell and her stewardship of retirement funds as well as her cozy relationship with GOP leadership, in particular Thom Tillis. For any true conservatives, you may want a waste basket beside your computer just in case you become physically ill….http://pundithouse.com/2014/04/tillis-on-janet-cowell-competent-elected-official/
I call on Janet Cowell to come out and publicly acknowledge or refute this claim….that she is or is about to dump State Employee Retirement money directly or indirectly into this failing PPP with Cintra. I call on The NC Legislature to FORCE TRANSPARENCY and OVERSIGHT on retirement investments. You have promised far too much return on retirement accounts to state employees without accepting the associated risks. Like Coward Democrats, GOP leaders simply tax their way out of trouble at the point of a gun.
T Bennett
In general, I don’t have a problem with the concept of toll roads. They are like a sales tax – you pay only for what you use. Right now, with the gas tax, I’m paying for roads I will never use.
One problem is the imposition of toll roads without a corresponding decrease in the gas tax. We cannot have toll roads and keep the gas tax where it is now.
Another problem is the kind described in this article. Companies selected to run toll roads must be chosen carefully, and not due to cronyist influence. Some companies may go bankrupt due to situations like those described by the previous commenter. When toll road companies go bankrupt, it must be in the law that the taxpayers do not bail out these companies.
FYI – I certainly don’t want the government operating the toll roads itself because it has shown no ability to run anything like a business. Too much bureaucratic bloat, too much cronyism, poor customer service, and a breeding ground for corruption (think NC’s state-run liquor sales system).
Cintra……..of Trans-Texas Corridor fame? These toll roads have been planned for a long time, and are part of a much larger agenda to create corridors all over North America, from Mexico, through the U.S., and up into Canada, for transport of Chinese goods delivered to seaports on the coast of Mexico. What we are witnessing in NC is but a local piece of this mega-plan.
Cintra and Macquarie were the industry heavyweights behind the ALEC “Establishing a Public-Private Partnership (P3) Authority Act” in 2011.
http://bit.ly/1vt5WS8
It was adopted the very same day that Thom Tillis was named ALEC “Legislator of the Year”.
http://www.wral.com/news/state/nccapitol/blogpost/9955257/
Couple months later, Macquarie’s lobbyist was invited to give a presentation in front of Tim Moffitt & William Brawley’s House P3 Committee:
http://bit.ly/1mLaQID
This same lobbyist is now appearing around NC telling local Chambers of Commerce that they really ought to support P3s and tolls to pay for highway construction. Here he is just a few months ago in Winston-Salem telling them that this is the only way they will get their long-sought I-74 project done:
http://bit.ly/10jNvUq
“Approach the project as a business, not a road.”
Think that this guy or someone like him isn’t coming to your town? If we don’t get active trying to stop it now, there won’t be a major highway project done in NC without someone trying to graft foreign private tolling onto it, is my prediction.