The firm that oversees a stretch of highway with the country's fastest speed limit says it is on better financial footing and under new ownership.
The SH 130 Concession Company, which operates a 41-mile stretch of the State Highway 130 toll road from Mustang Ridge to Seguin, announced Wednesday that it has exited bankruptcy a year after filing for it, while removing over a billion dollars in debt and attracting $260 million in new financing.
“SH 130 Concession Company has emerged from the Chapter 11 process as a much stronger company,” Andy Bailey, the company's new CEO, said in a release.
SH 130, which runs a total of 91 miles from north of Austin to Seguin, was initially touted as a way to alleviate gridlock on Interstate 35 through the capital city. The southern section is operated by the Concession Company and has an 85 mph speed limit. The rest is run by the Texas Department of Transportation.
Before the highly publicized opening of the southern portion of the highway in 2012, the SH 130 Concession Company signed a then-unprecedented 50-year deal with the state in which the company agreed to split toll revenues with Texas while assuming building and operation costs. Almost instantly, traffic revenues failed to live up to expectations. In 2014, the SH 130 Concession Company nearly defaulted on its debt. The company filed for Chapter 11 last year.
The bankruptcy filing quickly prompted concerns among critics of the project that the state might end up having to put tax dollars to cover the road's debts. But officials with the Texas Department of Transportation insisted the deal had been originally arranged to ensure the state could not end up responsible for road's debt.
"We knew that 130 was tough, and somebody else said, ‘We’ll take that risk,'” said Ted Houghton, then a Texas Transportation Commissioner, in 2013.
Brian Cassidy, an Austin-based lawyer for Locke Lord, one of many firms that helped SH 130 navigate its bankruptcy, noted that the company kept the highway open while it restructured its debt. The $260 million in new financing comes in the form of a loan, which represents the restructured company's only current direct debt, according to company spokeswoman Kate Miller Morton.
"One of the criticisms that you hear periodically about public-private partnerships is that they somehow put the public at risk of having to cover private sector obligations," Cassidy said. "The fact is, if the agreements are structured correctly — and this is an example of one that was — then that risk to the public sector doesn't really exist."
The SH 130 Concession Company was originally a joint venture of Cintra, a Spanish company that oversees several other Texas toll roads, and San Antonio-based Zachry American Infrastructure. But as part of the bankruptcy process, Strategic Value Partners, an international investment firm that focuses on distressed debt, led a group of investment funds that assumed control of the company, Morton said. Cintra no longer owns any stake in SH 130, she said.
TxDOT spokesman Bob Kaufman said that the agency "conducted a careful review of the new operator" as part of the restructuring process.
"SH 130 continues to be a viable alternative for drivers who want to bypass Austin and avoid congestion on I-35," Kaufman said. "No state money was used for this portion of SH 130. Most importantly, there is no impact to Texas taxpayers or to the state."
Bailey said the company will use its new funding to improve infrastructure as well as its marketing efforts.
Cassidy noted that, because of the joint revenue agreement, a brighter future for the SH 130 Concession Company benefits the Texas taxpayer.
“The better the road does, the better the state does,” he said.
During this year's legislative session, a bill that would have allowed for some communities to move forward with toll roads structured as public-private partnerships, similarly to SH 130, failed to pass.
Disclosure: Cintra US and Zachry Holdings Inc. have been financial supporters of The Texas Tribune. A complete list of Tribune donors and sponsors can be viewed here.
Clarification: This story has been updated to better describe the location of the portion of State Highway 130 that is operated by the SH 130 Concession Company.
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