Bankrupt S.C. Toll Road Set to Start Bond Exchange

BRADENTON, Fla. — The Connector 2000 Association Inc. was expected to begin the exchange of restructured bonds on Monday as part of the South Carolina toll road operator’s bankruptcy plan, which went into effect last week.

The association began issuing new CUSIPs on April 1 for which bondholders will receive a percentage of the restructured debt based on the value and amount of their investments.

A formula enabling bondholders to determine the amount of new, lower principal they will receive along with a new yield and maturity schedule is included in a material-event notice filed Monday by U.S. Bank NA, the trustee.

The private nonprofit association sold $66.2 million of Series A senior current-interest bonds, $87.4 million of Series B senior capital-appreciation bonds, and $46.6 million of Series C subordinate capital-appreciation bonds in 1998 to build the 16-mile-long start-up toll road called the Southern Connector near Greenville.

The association defaulted on the bonds in January 2010 and filed a petition for bankruptcy on June 24.

A plan to restructure the bonds was approved by federal Judge David Duncan last month.

The bankruptcy plan reduces the association’s outstanding debt to $148 million from about $329 million.

Under the plan, the 1998 current-interest and zero-coupon bonds are being exchanged for 2011 zero-coupon bonds.

Final maturities will be extended by 12 years. Subordinate and junior-subordinate bonds are replacing the former senior and subordinate bonds.

The new bonds will be recorded by the Depository Trust Co. and tradable once they have cleared DTC, a source familiar with the case said.

Some investors want to begin trading their bonds as soon as possible, the source said.

Some bondholders have also expressed interest in having the new bonds rated, according to the source.

When the debt was sold in 1998, Standard & Poor’s rated the senior bonds BBB-minus. The agency lowered its rating to D from C in January 2010, when the association defaulted on its payments.

The agency’s website reflects that the bonds became non-rated on March 21.

According to Standard & Poor’s, debt service on the bonds had been paid as scheduled through July 1, 2009, though the payments came largely from the debt-service reserve fund that had not been replenished.

The toll road opened eight months early in March 2001 but never came close to the traffic and revenue estimates produced by Wilbur Smith Associates, a Columbia, S.C.-based transportation and infrastructure consulting firm.

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Bankruptcy Transportation industry South Carolina
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