WASHINGTON — A South Carolina bankruptcy judge held a hearing Friday to consider the restructuring plan for the Connector 2000 Association Inc., the bankrupt South Carolina toll road operator, setting up the issuer’s exit from bankruptcy after years of uncertainty for bondholders.
Bankruptcy Judge David Duncan in Spartanburg heard deliberations on Friday and no judgement was made by press time.
If approved, the restructuring agreement will require 120 new Cusip numbers for bonds that will mature serially from 2012 to 2051.
The final maturity on the debt will be extended by 12 years. In all, the plan reduces the association’s outstanding debt to $148 million from about $329 million.
The new bonds could be issued as early as next month, sources have said.
The restructuring agreement between a core group of bondholders and the state was negotiated in November. The plan was put to a vote among all bondholders earlier this year.
But it is unclear how many bondholders there are and if enough of them would support the restructuring. The bonds, issued in 1998, are book-entry securities without investment certificates and are administered by the Depository Trust Corp.
The success of the restructuring plan hinged on bondholders sending back their ballots — and enough of them that the bankruptcy court judge felt confident approving the plan.
For the restructuring plan to proceed, a simple majority of voters must approve the restructuring and two-thirds of the dollar amount from the votes need to be in the affirmative.
Earlier this month, the Connector’s bondholders overwhelmingly voted to approve the restructuring plan. Senior bondholders cast 167 votes, representing $152.1 million, to move forward with the restructuring and 17 voters rejected the plan, according to court documents.
Among subordinate bondholders, 24 votes, representing $7.2 million, approved the plan and nine votes objected. Epiq Bankruptcy Solutions LLC conducted the vote earlier this year.
The South Carolina Department of Transportation also endorsed the plan. SCDOT had initially challenged the Connector’s right to file as a Chapter 9 entity. State officials were concerned taxpayers would be liable for the maintenance of the toll road while bondholders were getting paid.
One bondholder, claiming to have about $1.6 million of Connector debt, filed an objection with the court earlier this month. Thomas Stoeckmann of Menomonee Falls, Wis., said in a two page letter that he objects to the restructuring plan because it gives too much control over the Connector to SCDOT.
Chapter 9 bankruptcies are typically a blue moon event. James E. Spiotto, a bankruptcy attorney with Chapman and Cutler LLP, said that including the Connector there have been 56 special municipal district and nine transportation-related Chapter 9 filings since 1980 out of 251 in total.
As a special purpose issuer, the Connector “might find Chapter 9 less complicated” than a local government would because of its specific function, Spiotto said.
Additionally, governments are typically loath to attempt a Chapter 9. Generally, governments will “want access to the municipal market” again, leading them to protect bondholders as much as possible, he said.
The Connector’s bonds continue to trade. On Thursday, the Connector’s Series B revenue capital appreciation bonds maturing in 2018 traded for about 12 cents on the dollar.
