But it’s not default-default just yet.
Although the company that built and operates the southern leg of the Texas 130 toll road recently managed to work out a payment extension with its lenders, an investor service that monitors the project still considers it in default.
Moody’s Investor Service issued a report last week, saying SH 130 Concession Company LLC did not have enough money to make a June 30 loan payment, which Moody’s predicted last month would likely happen.
“Moody’s view is that the failure to meet the full payment that was originally scheduled … constitutes a ‘default’ under Moody’s definition,” the July 8 report said.
However, the concession company worked out a deal with its senior lenders June 26, “which allowed for an undisclosed partial payment” and which also pushed back the deadline to pay off the remaining payment until Dec. 15, the report said.
That means the project is not in legal default. The report said the extension also gives the senior lenders time to restructure the debt.
In the case of a legal default, control of the project would transfer from the borrower to the lender, said Karan Bhanot, a finance professor at the University of Texas at San Antonio’s College of Business. That’s not what’s happening in this case.
Instead, Moody’s is applying its own, stricter definition of default.
See here for the background. I think the odds that they can escape legal default are slim, but I suppose one should never underestimate the ability of companies like that to wheedle extensions and exceptions for long periods of time. I just hope TxDOT is ready to pick up the pieces when it all falls apart.