No Shortage of Investors Lining Up to Operate Bankrupt Toll Road

"Some of the world's largest pension funds and infrastructure investors are forming consortia to bid for the operator of an Indiana toll road that filed for bankruptcy last month, according to people familiar with the matter," write Greg Roumeliotis and Mike Stone for Reuters.

The interest in the asset shows that infrastructure investors have not been fazed by the failure of one of the largest privatizations of U.S. infrastructure, even though any deal is expected to come at a significant discount to its original value.

Adding to the enigma is that one of the former partners, Cintra, is bidding on the contract in partnership with other groups. Spain's Cintra and Australia's Macquarie Group Ltd. are the current operators in the form of "ITR Concession Co. LLC. It "has proposed selling itself to the highest bidder in its Chapter 11 bankruptcy to raise money to pay down $6 billion in debt," write Roumeliotis and Stone. "Alternatively, the company could pursue a debt restructuring."

Three consortiums are prepared to bid for the contract which could fetch "between $4 billion and $5 billion" in an auction "expected to kick off later this month," they write. Abu Dhabi Investment Authority has also shown interest.

While no reason is given for the interest in becoming the new toll road operator, the groups clearly appear unfazed by the bankruptcy, and perhaps consider it more of an aberration than what to expect under new operation.

For example, the writers note that "almost as soon as the deal closed [in 2006], the United States slid into a deep recession and has been slow to recover from a financial crisis in 2008. Traffic volume on the toll road in 2013 was 10.7 percent below the 2007 level, according to documents filed with the U.S. Bankruptcy Court in Chicago."

[Hat tip to the AASHTO Daily Transportation Update, October 15, 2014]