Thursday, October 2, 2014

The privatized Indiana Toll Road goes belly-up

The private operator that was supposed to run the Indiana Toll Road until 2081 might not make it. Seems they’re broke, unable to pay their bills, and so have filed for bankruptcy.

In case you’ve forgotten, in 2006 the state of Indiana sold rights to the 60-year-old, 157-mile toll road to a Spanish-Australian consortium for 75 years. The price: $3.8 billion. Somehow, according to The Wall Street Journal, the consortium is now $6 billion in debt and they just missed an interest payment.

How can you buy a toll road for $3.8 billion, collect tolls for eight years, and owe $6 billion – unless you borrowed the original $3.8 billion from payday lenders? Of course, the ability to understand such things is not given to us little people.

But don’t worry. Indiana assures us the Chapter 11 restructuring won’t noticeably affect day-to-day operations on the toll road.

At least not until 2017.

That’s when toll increase restraints in the original privatizing agreement relax, according to a former toll road oversight board member who spoke to WSBT-TV, the CBS affiliate in South Bend. So whoever operates the road then will be able to raise tolls “substantially,” WSBT-TV reported. That probably explains why some payday lenders – excuse me, I mean hedge funds – are buying debt from the consortium and lurking about to see who gets the keys to the Indiana Toll Road cash register.

Should the consortium collapse – or whatever dying consortiums do – it isn’t entirely clear who takes over. Some say the state, some say the circling credit buzzards. My money’s on the buzzards, and if that’s the case, say some financial experts, lawsuits will be launched. Aggressive new owners will want to renegotiate the original agreement with the state to allow them – the buzzards – even fewer restraints.

To be fair, Indiana now has $3.8 billion worth of capital improvements because of the original deal. A supporter pointed to projects in St. Joseph and Elkhart Counties, a new U.S. 31, added lanes on the toll road itself, and lots of other improvements.

Great. I hope they are truly monumental improvements because the money is gone now. But the Indiana Toll Road lease has another 67 years to run and one opportunity after another to increase tolls.

Back in 2006, OOIDA said the sale was a bad idea, and we would love to celebrate having been right. But there can be no joy when OOIDA members will probably end up paying way more than their share for this debacle.