The Indiana Toll Road operators are looking at filing for bankruptcy to get out from under $6 billion in debt and selling the right to operate the road, according to media reports.
Citing anonymous sources, the Wall Street Journal reported the road's operators, Spain's Cintra and Australia's Macquarie Group Ltd., have reached an agreement with their largest creditors to restructure debt in bankruptcy court and to sell a new party the rights to operate the road under the remainder of a $3.8 billion, 75-year lease.
The Indiana Toll Road Concession Co. would file for Chapter 11 bankruptcy, which involves the reorganization of debt and not liquidation, sell the right to operate the road, and funnel most of the sales proceeds to secured creditors, which are mostly hedge funds.
Toll Road operations should not be affected by any deal, according to a source familiar with the situation. Any bankruptcy filing or change in management would not impact drivers, truckers, Toll Road employees or communities that 157-mile toll road cuts through. Indiana would continue to own the road, which is lease in a public-private partnership.
Paula Chirhart, a senior vice president at the investment bank Macquarie, declined to comment.
"We are aware that the ITRCC and its lenders are in the process of finalizing negotiations for a debt settlement," said Toll Road Oversight Director James McGoff with the Indiana Finance Authority. "ITRCC continues to manage the Indiana Toll Road in compliance with the lease agreement – and that's our primary focus. The ITRCC continues to invest in the necessary capital improvements to assure the road's upkeep and the safety for the traveling public."
The Indiana Finance Authority would have to approve any future operators of the Toll Road, McGoff said.
"The Indiana Finance Authority will vigorously enforce all of the state's rights and remedies under the concession and lease agreement, including its consent rights with respect to potential transactions involving the concessionaire," he said.
Privately operated toll roads have struggled financially across the country in recent years. Operators of toll roads have missed debt payments, gone bankrupt or been written down as worthless assets in Texas, California, South Carolina and Virginia.
Cintra and Macquarie leased the Toll Road for $3.8 billion in 2006. Traffic volumes on the Toll Road, which handles a lot of semi-truck shipments between Chicago and Detroit, have been lower than expected since the Great Recession.
The Indiana Toll Road Concession Co. failed to make an interest payment that was due in June.
Hammond Mayor Thomas McDermott Jr. has been a vocal critic of the Toll Road lease, which he said exploits Northwest Indiana.
"It's not fair that only Northern Indiana is paying the tolls, when the money's being used to build bridges over the Ohio River or interchanges in Indianapolis," he said. "It's not fair when all of the burden is being felt up here."
The lease calls for annual toll increases, which now amounts to a total $10 for a car that travels all the way from the Chicago Skyway to the Ohio Turnpike. A new operator would have an incentive to improve the Toll Roads' balance sheet, possibly by cutting back on maintenance or repair projects, McDermott said.
The Toll Road is already in questionable shape in places, such as the functionally obsolete interchange in Lake Station, McDermott said.