DALLAS -- The Indiana Finance Authority board green-lighted a plan for the state take over the Interstate 69 public-private partnership project using state bonds to take out $240 million of private activity bonds.
The plan approved by the IFA on Thursday paves the way for the state to cancel the P3 that ran into problems over construction delays and the fiscal woes of the lead contractor’s parent corporation. The state will assume direct control over the highway project. The state had recently reached a settlement in principle with the developer -- I-69 Development Partners -- and holders of 96% of principal of the $240 million of PABs.
The IFA, which sold the bonds on the developer’s behalf and was on the hook for repayment, will issue the new debt.
“The board-approved transaction will not increase the overall project expense to taxpayers and may provide the State future savings,” Indiana Public Finance Director Dan Huge said in a press release.
Costs to complete the project, including debt service and future operations and maintenance of the completed corridor, total about $560 million -- compared to an approximately $590 million that would have been paid out under the former public-private agreement.
The IFA will issue highway revenue bonds which are expected to carry a AA-plus rating based on current state ratings. Proceeds will redeem the PABs at a total cost with interest of $246 million. Bondholders will receive an additional $12 million from the I-69 Development Partners and the IFA will receive $50 million from the developer.
The state has also revised the final construction deadline which is referred as the “longstop” date to August 2018 from Oct. 31.
The IFA announced the settlement agreement on June 16. The financing plan to complete the transaction must be reviewed by the State Budget Committee, which will meet in July. Final closing on the transaction is expected after that review is complete and the final version of the agreement is signed by all parties.
Fitch Ratings, Moody’s Investors Service, and S&P Global Ratings have all announced the settlement agreement, which avoids a looming default on the PABs, will not affect the state’s triple-A ratings.