CHICAGO - Two Indiana counties have joined to bid on a 75-year lease of the bankrupt Indiana Toll Road.
Supporters had originally hoped that seven counties along the toll road would join the bid. But as of Nov. 21, three of the seven had rejected the proposal.
Elkhart, LaGrange and St. Joseph counties all rejected the proposal at board meetings last week. Each had been asked to chip in $10,000 for the preliminary bids, which were due Nov. 20. A St. Joseph County commissioner said there were too many questions about the condition of the toll road as well as the new agency, according to local reports. Two other counties have yet to vote.
Lake and LaPorte Counties reportedly submitted a preliminary bid for the toll road on Nov. 20.
The proposal calls for the counties to form a new non-profit bond-issuing agency that would issue more than $4 billion of tax-exempt bonds to finance the bid.
In 2006, Indiana leased the road for 75 years for $3.8 billion, marking the largest privatization of a public asset to date.
ITR Concession Co., the operator of the 157-mile tollway, declared Chapter 11 bankruptcy in September. The company, a subsidiary of Macquarie Infrastructure Partners, Macquarie Atlas Roads and Cintra, struggled with overly optimistic traffic projections coupled with a debt-heavy capital structure and a $2.15 billion liability tied to swaps.
Under its recently approved bankruptcy plan, ITR would either sell the lease to a new operator or restructure with $2.75 billion of new debt. The plan gives the firm until August 2015 to find a buyer to take over the lease.
LaPorte County, about an hour outside Chicago, hired Piper Jaffray to analyze the feasibility of a bid financed with non-recourse toll revenue-backed bonds issued through a non-profit conduit.
The county has also hired Chicago-based law firm Goldstein & McClintock LLP as special counsel.
In 2006, Indiana leased the road for 75 years for $3.8 billion, marking the largest privatization of a public asset to date.
Private equity bids are expected to come in as high as $5 billion, according to various reports.
Piper Jaffray, in its analysis, noted that the current muni market is "favorable for a potential public acquisition (low municipal supply and significant demand for high-yield municipal debt)."
A public deal would likely feature a mix of senior- and subordinate-lien bonds issued through a not-for-profit conduit issuer. The counties would hire a private firm to operate the road. There would be no state involvement.
Indiana officials have said the state has no interest in buying back the asset, and note that any new operator will be bound by the same lease terms, including toll rate caps, as the ITR.
