Indiana Toll Road revenue has increased, but debt costs ballooned, precipitating ...
Revenue generated by the Indiana Toll Road has increased and operating costs are down.
Still, the improvement - detailed in a bankruptcy court document (read on) - wasn't enough to keep the roadway operator, the Indiana Toll Road Concession Co., or ITRCC, from filing for bankruptcy protection.
ITRCC, the private Spanish-Australian consortium picked by the state of Indiana to take over toll road operations in 2006, filed for bankruptcy protection in U.S. Bankruptcy Court in Chicago on Sunday. The move resulted, in part, from the firm's inability to keep up with certain debt obligations brought on by economic conditions and lower-than-anticipated traffic on the roadway.
Indiana and toll road officials maintain that motorists won't notice any difference, and guidelines governing allowable toll rate increases won't change. Whatever the case, the bankruptcy filing, for some, revives the debate over the wisdom of privatizing operation of state-owned assets that accompanied the controversial decision to grant ITRCC the 75-year toll road operational lease.
Screen shot/Google MapsFollowing are more details on ITRCC and the bankruptcy filing, pulling from a supporting document submitted by ITRCC CEO Fernando Redondo (scroll down to see it).
On the bright side: Toll road revenue is up 36 percent since 2007, while operational costs have fallen 27 percent compared to the costs under the previous operator, the state of Indiana.
Tolls collected - there were $196 million worth in 2013 - have outpaced operating costs, excluding certain debt obligations, by a four-to-one ratio. That is, the ITRCC has earned nearly $4 (again, excluding certain debt obligations) for every $1 in operating expenses.
The drop in operational costs resulted, in part, from synergies in merging certain toll road operations with an affiliate, the Skyway Concessionaire, which operates the Chicago Skyway Toll Bridge.
On the not so bright side: Those bright spots are countered by the impact of the Great Recession, which started in late 2008, resulting in reduced truck traffic and less-than-projected tolls.
In fact, the economic downturn reduced overall toll road traffic by 10.5 percent between 2007 and 2013.
'Though economic conditions have since improved and the path forward is strong, the Debtors have been forced to devote an increasing share of their operating income towards servicing their debt obligations each year,' Redondo's statement reads.
More particularly, a dip in interest rates during the recession wreaked havoc on the ITRCC 'interest rate hedging obligations,' which resulted in a missed $102 million interest payment on June 30 and prospects for more missed payments.
The debt: ITRCC had $3.855 billion in outstanding principal due on varied loans as of the bankruptcy filing and another $2.15 billion in 'rate-hedging obligations,' meant as a guard against interest rate changes. That's $6.005 billion in debt in all.
The hoped-for fix: ITRCC is looking to sell the operational lease to a new entity or reorganize. A special committee will decide by Aug. 1, 2015, if any sale proposals 'provide greater value' than a proposed reorganization, per the bankruptcy proposal, Redondo said.
More than $450 million in upgrades: ITRCC has thus far spent $458 million to upgrade the toll road, including:
$250 million to address congestion and add lanes in certain segments; $74 million in resurfacing; $40 million to expand the electronic payment system and existing toll booth system; $39 million to fix bridges and other toll road structures; and $5 million to build an Indiana State Police post near the east Elkhart toll road exit/entry point. ITRCC CEO Redondo's bankruptcy statement
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