"We anticipated this could be a possibility," Gov. Mike Pence said. "But Hoosiers can expect business as usual on the Indiana Toll Road."

CHICAGO — Indiana officials assured residents Monday that the bankruptcy of the private operator of the 157-mile Indiana Toll Road would not hurt the state.

"We anticipated this could be a possibility," Indiana Gov. Mike Pence said in a statement. "But Hoosiers can expect business as usual on the Indiana Toll Road."

While the bankruptcy process is not expected to impact toll road rates or operations, one analyst warned that the 2006 toll road deal may yet reveal future pitfalls for Indiana or the next operator of the tollway.

ITR Concession Co. LLC filed for Chapter 11 on Monday after struggling with lower-than-expected toll revenue. As part of the bankruptcy, the firm said it will try to sell its 75-year lease of the toll road, using the proceeds to pay off its creditors.

"Contingencies to address situations like this were written into the 2006 agreement," IFA director Kendra York said in a statement. "So, day-to-day operations will continue as they have been on this important Indiana roadway, and we'll continue to monitor the bankruptcy process on behalf of Hoosier taxpayers."

Indiana leased the road for 75 years in 2006 for $3.8 billion, marking the largest privatization of a public asset to date. The state used the proceeds to finance a 10-year transportation construction plan. It has now spent or earmarked all of the proceeds.

The Indiana Finance Authority Monday put out a statement saying the state has final say on who takes over the lease. The state also gets the road back if ITR is unable to sell the lease or pay its debt, officials said. Any new operator would not be able to raise tolls beyond caps set in the original agreement.

The aggressive rate increases that are permitted in the lease could cause headaches in the future, Fitch Ratings analyst Cherian George said.

"The long-term issue for the state of Indiana is whether it will be able to honor its side of the bargain" in terms of the toll rates, George said. "All the money has been spent in Indiana, and any future elected officials has only the issue of escalating toll rates."

The original lease ties toll rates to nominal GDP per capita. That index is generally higher than inflation, on average by about 2%, George noted. It's a "generous" index that allowed Indiana to get a bigger check up front and any toll road operator to raise rates at a more aggressive rate than average, he said.

With a nominal-GDP-per-capita index, toll rates could rise by 3% to 4% a year, he said. The Chicago Skyway has a similar toll rate provision.

For now, though, ratings analysts agreed that the state appears largely protected from any direct fallout from ITR's bankruptcy or a new firm taking over operation of the road.

When bidding on the road in early 2006, ITR, which is controlled by Australian bank Macquarie Group LT and Spanish infrastructure firm Ferrovial SA, outbid its three closest competitors by $1 billion.

The bankruptcy shows the importance of accurate traffic forecasts, analysts said.

On the P3 risk spectrum, "toll roads are of a riskier nature," said Standard & Poor's analyst Anne Selting.

"That's for one fundamental reason: they're obviously completely dependent on volume and user projections," said Selting.

"Getting the forecast right in terms of actual usage is a very critical aspect of our ratings," she said.

"The P3 infrastructure market is really starting to get some momentum," said S&P analyst Jodi Hecht. "We've seen several deals close, but structured using different structures. Toll roads and others with a volume-risk basis, the investor knows there's more risk involved."

A bad economy post-2008 and overly optimistic traffic projections caused ITR's current financial problems, George said.

ITR's bankruptcy will likely have limited impact on the triple-A rated state's credit, said Moody's analyst Julius Vizner.

"The credit implications for Indiana are small," Vizner said in an email to The Bond Buyer. "Indiana received $3.8 billion up front when the lease was executed in 2006, so no payments to it would be interrupted.  This is an issue between the private concessionaire and its bondholders. If there is a bankruptcy, the most likely scenario is a new company operates the road, with no liability to the state."

Private operators of the South Bay Expressway, a toll road near San Diego, and of the Southern Connector in South Carolina have also filed for bankruptcy.

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