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SH 130 Concession Company LLC

SH130 operator emerges from bankruptcy

Good for them.

The firm that oversees a stretch of highway with the country’s fastest speed limit says it is on better financial footing and under new ownership.

The SH 130 Concession Company, which operates a 41-mile stretch of the State Highway 130 toll road north of Mustang Ridge, announced Wednesday that it has exited bankruptcy a year after filing for it, while removing over a billion dollars in debt and attracting $260 million in new financing.

“SH 130 Concession Company has emerged from the Chapter 11 process as a much stronger company,” Andy Bailey, the company’s new CEO, said in a release.

[…]

Brian Cassidy, an Austin-based lawyer for Locke Lord, one of many firms that helped SH 130 navigate its bankruptcy, noted that the company kept the highway open while it restructured its debt. The $260 million in new financing comes in the form of a loan, which represents the restructured company’s only current direct debt, according to company spokeswoman Kate Miller Morton.

“One of the criticisms that you hear periodically about public-private partnerships is that they somehow put the public at risk of having to cover private sector obligations,” Cassidy said. “The fact is, if the agreements are structured correctly — and this is an example of one that was — then that risk to the public sector doesn’t really exist.”

See here and here for the background. I’m certainly glad that this all happened without the taxpayers getting stuck with the check, but none of this makes SH 130 a better idea. There’s nothing in the story to indicate whether usage of the road has increased or not. I’m not surprised that some entity was willing to make a bet on this thing, but let’s be clear, that’s what it is. It may never have any better odds of making a profit.

SH 130 operator to give up its ownership stake

Another step on the road to bankruptcy.

Speed Limit 85

SH 130 Concession Co. filed a bankruptcy reorganization plan Friday that proposes transferring company ownership to its largest lenders, which include the Federal Highway Administration and a group of European banks. The company owes more than $1.6 billion. It is owned by Spanish road developer Cintra, the majority stakeholder, and San Antonio-based Zachry American Infrastructure.

[…]

The company paid TxDOT $125 million upfront for the rights to operate the road, which was built to bypass Interstate 35 traffic between San Antonio and Austin and then became state property. It also agreed to share some of its toll revenue with the state as part of the lease agreement.

Texas 130’s southern section, which connects to a state-operated section that ends in Georgetown, opened in 2012 and became known for its 85-mph speed limit, the highest in the country. But it immediately missed the company’s traffic projections, and Moody’s Investors Service assigned its debt a junk-bond rating three years ago as a result.

The company issued a substantial amount of debt to finance the $1.3 billion project. It owes about $551 million on a Transportation Infrastructure Finance and Innovation loan from the Federal Highway Administration, and about $721 million on its bank loans, according to court filings.

A FHWA spokeswoman was not available for comment Friday afternoon.

The reorganization plan proposes that SH 130 Concession Co., under its lenders’ ownership, would continue to operate and maintain the road. The plan has yet to be approved by the court.

“It’s important to understand that we don’t expect any sudden changes,” Guy Russell, SH 130’s chief operating officer, said in an email. “The plan calls for a smooth transition period of up to 18 months during which SH 130 Concession Company will continue to operate the facility per usual.”

See here, here, and here for the background. Cintra and Zachry will take a bath if this goes forward, which is fine by me. I’m less fine with the Federal Highway Administration getting stiffed, though it’s not clear from this story if that may happen. I’m not sure there’s any lesson to be learned here beyond the obvious one of not building roads where there are no people, but I hope we at least grasp that one.

SH 130 operator files for bankruptcy

Boom.

Speed Limit 85

A private company that operates part of the Texas toll road with the highest speed limit in the country filed for bankruptcy Wednesday, fewer than three years after the section of the road it oversees first opened.

The SH 130 Concession Company, a partnership between Spain-based Cintra and San Antonio-based Zachry American Infrastructure, opened the 41-mile-long southern portion of the State Highway 130 toll road, from north of Mustang Ridge to Seguin, in October 2012 to much fanfare. In addition to the record 85 mile-per-hour speed limit, the company signed an unprecedented deal with the state to build and operate its section of the road for 50 years in exchange for a portion of the toll revenue.

[…]

SH 130 Concession Company CEO Alfonso Orol said in a statement that the road will continue to operate while it goes through Chapter 11 bankruptcy proceedings.

“The filing will have no financial impact on the state of Texas,” Orol said. “It’s business as usual for our customers, employees, vendors, and surrounding communities during these proceedings.”

See here and here for the prior steps towards this seemingly inevitable point. The Statesman adds on.

The problem, despite the road’s potential for speed, has been low traffic. “The lingering effects of the recession,” the company said in a press release Wednesday, “reduced traffic volumes regionally during the project’s early years and delayed development along the largely rural SH 130 corridor.”

The building boom in Central Texas has largely bypassed Lockhart (located just east of Texas 130) and Caldwell County, and several large developments announced along the corridor are still only in aspirational form.

As of 2014, when the road had about 16,400 toll transactions a day, traffic was about 30 percent below the projections used in borrowing the money for the road. Original projections for 2015 and 2016 weren’t available Wednesday.

But use of the road, while not enough to meet the company’s financial obligations, has been improving. According to SH 130 Concession, the road had 5.15 million transactions in 2013, 5.99 million in 2014 (a 16.3 percent increase) and 6.9 million in 2015 (a 15.2 percent increase).

See here for all my SH 130 blogging. Will this actually affect operations of this ill-fated road? Who knows, and who would be able to tell if it did? I’m just wondering what the next stage of this story is.

SH 130 operator in default

But it’s not default-default just yet.

Speed Limit 85

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.

Company operating SH 130 may default

Oops.

Speed Limit 85

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.”

[…]

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.

See here, here, here, and here for the background. One hopes this new traffic and revenue study will be more reality-based than the previous ones were. I for one have always thought that the problem here is that this road is out in the middle of nowhere, but hey, I’m no expert, so what do I know? The Highwayman and EoW have more.