Texas toll road could be headed for default

By David Tanner, Land Line associate editor | Monday, October 21, 2013

Toll road opponents have been warning for years that public-private partnerships are not the silver bullet to solving transportation funding issues. A toll road in the Austin, Texas, region has recently provided those opponents with some more fodder.

Analysts from Moody’s Investor Service downgraded the first leg of the SH 130 toll road to Caa3 status on Oct. 15. According to the NASDAQ, an asset rated at Caa3 is judged to be in poor standing and is subject to very high credit risk.

Or as Moody’s puts it, the company that operates the roadway could default on its financial obligations as soon as 2014, just two years after opening the SH 130 to traffic, unless the company can restructure its debt.

The roadway operator is the SH 130 Concession Co., a partnership consisting of 65 percent ownership by Cintra of Spain and 35 percent ownership of Zachry Construction of Texas.

Debts for the company still include $493 million from a loan obtained through the federal government’s TIFIA program. TIFIA stands for Transportation Infrastructure Finance and Innovation Act.

The SH 130 toll road is considered an alternative to Interstate 35 in the Austin region. Although it currently sports an 85-mph speed limit, the roadway has not seen the traffic that investors had hoped for.

“Moody’s notes that the project has a favorable location and provides congestion relief to the highly utilized I-35 NAFTA corridor,” analysts stated in their report.

“However, the rate of traffic and revenue growth is not enough to meet the debt obligations that continue to grow when TIFIA interest payments begin in 2017. As a result, a debt restructuring of some kind or sponsor equity support are the only feasible options, besides allowing a payment default to occur.”

Spanish company Cintra Concessiones de Infraestructuras de Transporte was one of the first international toll road operators to arrive on American soil. Cintra and parent company Ferrovial operate or co-operate four toll roads in Texas and six overall.

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