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Counties Finalizing Indiana Toll Road Bid

CHICAGO — Two northwest Indiana counties are finalizing their tax-exempt bond-financed bid for the bankrupt Indiana Toll Road.

Bids are due on March 15.

Lake and LaPorte counties will hold series of meetings over the next two weeks to vote on an interlocal agreement that lays out financial and structural details of the proposal.

It's the latest move by the two counties to craft a public-private partnership to take over the toll road; its current owners declared bankruptcy last year.

The counties are the only public entities vying for the asset. Private equity bids are expected to come in as high as $5 billion.

A winner may be selected within the next few months. The Indiana Finance Authority will approve any winning bidder and would also approve the bond request.

Officials say their ability to issue tax-exempt debt gives them a significant advantage over other bidders on the 75-year asset lease.

They want to issue so-called non-recourse revenue bonds that are backed solely by toll road revenue and no back-up pledges to mitigate taxpayer risk.

Supporters say their financial projections show the toll road would generate enough revenue to cover debt service and bring in additional revenue for the two counties.

"Our financial advisors at Piper Jaffray continued to believe, as they did in November, that with the lower cost of capital involved in a municipal debt financed bid, we can be highly competitive in the bid process," LaPorte County Commissioner David Decker told local reporters last week.

Piper Jaffray & Co. presented a report last year to the LaPorte County that should the toll road could generate between $38 million and $53 million after operating and maintenance expenses.

ITR Concession Co., the operator of the 157-mile tollway, declared Chapter 11 bankruptcy in September 2014.

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.

ITR Concession paid $3.8 billion to the state of Indiana in 2006 for the 75-year lease of the 157-mile toll highway.

The interlocal agreement stipulates that the two counties would be line for $5 million each annually, as well as any excess revenue, as part of the agreement. The agreement also provides for a $10 million annual founder's fee that the private operator would pay to the two counties. Other counties would be able to join the lease later and share in the proceeds, but not the $10 million.

The counties have "engaged lawyers, financial advisors, underwriters and other consultants at little or cost to the counties to help us submit a competitive bid," Lake County Commissioner President Roosevelt Allen, D-Gary, told the Northwest Indiana Times newspaper. "This is a win-win for our taxpayers if we can succeed."

Under the interlocal agreement, the newly formed Northern Indiana Toll Road Authority Inc. would consist of a nine-member board made up of elected officials from the two counties as well as non-elected professionals.

The private toll road operator would have a representative on the board without voting power.

The LaPorte County Commission will consider the deal on March 4. Lake County commissioners will take it up on March 10. The LaPorte county council will consider it March 11.

In addition to Piper Jaffray, the counties have been working with Goldstein & McClintock LLP and Kreig DeVault LLP to help draw up the agreement.

UBS Securities LLC is acting as financial advisor to a special committee for ITR that's overseeing the  potential sale or restructuring. The committee will also work with the Indiana Finance Authority to transition the toll road to the winning bidder, according to court documents.  

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