Pension Fund Manager Takes Over Bankrupt Indiana Toll Road

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CHICAGO — Australian fund manager IFM Investors has formally taken over the Indiana Toll Road after closing a $5.72 billion deal that marks the largest price tag for an existing U.S. asset.

The deal also is the first time that major U.S. pension funds have invested in American infrastructure.

The new owners bought the rights to the toll road lease from ITR Concession Company, which declared bankruptcy last September. ITR paid Indiana $3.8 billion in cash for the 75-year lease in 2006, the largest privatization to date at that time. The lease now has 66 years remaining.

The Indiana Finance Authority approved the deal at its May meeting. State officials said the change in ownership would mean new jobs and a better road.

"Roads mean jobs, and for that reason I applaud the Indiana Finance Authority for its work approving a new toll road operator," Indiana Gov. Mike Pence said in a statement. "This means better roads and rest stops for Hoosiers, and I am confident that IFM Investors has the experience and expertise to operate the toll road effectively."

The terms of the 2006 concession, including toll rate increases, remain the same. IFM said it plans to invest $260 million in the toll road over the next five years.

"We believe these improvements will create meaningful jobs growth over the next few years and what's more, they will be made possible by the capital that was invested in the toll road by more than 70 U.S pension funds via IFM Investors," said Ken Daley, the new CEO of the Indiana Toll Road Concession Company.

IFM is owned by 30 non-profit Australian pension funds. Its investors include many large North American pension funds, including the California State Teachers' Retirement System, the New York City Employees' Retirement System, the state Board of Administration in Florida, the Arizona State Retirement System, and the Illinois State Board of Investment.

A special committee of investors established by the bankruptcy court selected IFM from a group of four bidders.

The original concessionaire, ITR Concessions, which was a Macquarie subsidiary, struggled with an aggressive debt structure burdened with interest-rate swaps that became a $2.1 billion liability. Traffic projections were also lower than originally projected.

IFM officials said in an earlier interview that they're confident they can make the deal work because they're using a more conservative capital structure.

"A significant amount of the equity for the investment was supplied by more than 70 U.S. pension funds and the transaction is being financed using what IFM Investors views as a prudent capital structure that includes debt with maturities as long as 40 years," the company said in a press release announcing the deal.

IFM now has four toll roads in its infrastructure portfolio.

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