ATLANTA - Once hailed as a means to spur economic development in the Greenville, S.C.-area, the Southern Connector toll road has failed to live up to expectations and the debt issued by the Connector 2000 Association to build the road is now in jeopardy.
The association has been forced to admit that it is in trouble in paying off the roughly $202 million of revenue bond debt issued for it in 1998 because its projections regarding how many drivers would use the road have not come to fruition, according to disclosure documents.
It was projected that at least 28,000 toll transactions per day could be recorded within the first year the road opened, according to the preliminary official statement.
The road is located in the southern area of Greenville and was meant to be a corridor for transportation through the area. The thought was once companies saw they had an easily accessible road through the area, they would build plants there or relocate there, according to officials at the time the road was built.
According to the company's Web site, officials claim the road has been an important component of the growth and development taking place in southern Greenville County, and it is providing an attractive alternate route to many motorists and truckers seeking to avoid congestion on Interstates 85 and 385.
At the current rate of usage of the toll road, officials estimate they won't be able to make the debt service payment of $153,000 that comes due on Jan. 1, 2010, according to Laura Macdonald, an analyst for Standard & Poor's.
Standard & Poor's last month downgraded the credit to CC from CCC. It had been rated BBB-minus initially when the bonds were sold. Standard & Poor's has a negative outlook in place noting that the association could be further downgraded if it did not take immediate steps to shore up its finances and prevent the bonds from defaulting. Standard & Poor's is the only agency to rate the debt.
The rated debt includes $66 million of Series 1998A bonds and $87.4 million of Series 1998B senior capital-appreciation toll road revenue bonds. There were also $46.6 million of Series 1998C subordinate-capital appreciation bonds that were issued but not rated by Standard & Poor's The principal and interest for most of the bonds have been paid from the debt reserve fund.
In the rating report Macdonald authored last month, she said the association could default by 2010.
In fact, since 2003, the association has had to tap into its debt service reserve fund almost every year to cover its payments. The bank trustee is U.S. Bank NA.
Acknowledging requirements posed by Standard & Poor's, the issuer hired Goldman, Sachs & Co. in May as its special financial consultant to explore what it calls strategic alternatives related to the association's existing capital structure. Calls to Goldman were not returned.
Association officials declined to comment for this story.
