Another (Surprising) Toll Road Bankruptcy

It wasn't supposed to go this way. When Indiana leased the state's namesake, but failing, 157-mile toll road for $3.8 billion to an Australian-Spanish consortium in 2006 for 75 years, analysts predicted a handsome return for investors.

3 minute read

September 22, 2014, 9:00 AM PDT

By Irvin Dawid

Toll Road Truck

View Factor Images / Shutterstock

Jon Hilkevitch, transportation reporter and "Getting Around" columnist for the Chicago Tribune, chalks the possible bankruptcy of the Indiana Toll Road up to reduced driving in the United States, a topic much discussed in Planetizen.

(T)ransportation sources said the toll road concessionaire miscalculated regional and national driving trends when it bid the lease contract on the 58-year-old highway.

Vehicle miles traveled in the U.S. hit a peak at 3 trillion miles in 2007, according to the Federal Highway Administration. It then began its largest decline since the 1940s, hastened by the Great Recession of 2008.

There was speculation that ITR Concession Co. LLC, created by a partnership of Spain's Cintra and Australia's Macquarie Group Ltd., would sell its lease to "to get out from under $6 billion in debt," wrote Joseph S. Pete, business reporter for The Times of Northwest Indiana (NWI) on Sept. 15. However, Hilkevitch writes on Sept. 20 that ITR "said over the weekend that its strategy involves either selling its assets or recapitalizing the company by cutting debt, without a sale."

A Sept. 21 AP article indicates that ITR will declare bankruptcy on Monday, Sept. 22 and create a new entity to operate the toll road.

Should ITR sell the lease in the future, "the state will suffer no harm," writes Pete's colleague at NWI, Dan Carden. 

In any case, the Indiana Toll Road was not alone in its financial predicament, notes Pete.

Before the toll road was leased in 2006, "tolls had not changed since 1985," wrote former Indiana Gov. Mitch Daniels in a 2006 New York Times op-ed (posted here). While the lease provided for annual toll increases, "finance professor Jonathan R. Peters at the City University of New York, an expert on toll roads, and other specialists who study toll road deals, cautioned that the lease in Indiana was structured so that tolls would remain relatively stable for the first decade, then could rise quickly for the remainder of the lease," as noted in 2008.

Huffington Post 2009 op-ed, posted here, opined that privatizing public toll roads was not in the public's interest. If the Indiana Toll Road is to be viewed as an example, the real risk lies with the private sector as Indiana appears to have come out $3.6 billion ahead in their lease.

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