The operator of the Indiana Toll Road plans to declare bankruptcy on Monday and put its 75-year lease for the road up for sale to interested bidders.
Toll Road operator Indiana Toll Road Concession Co. LLC (ITR) made that announcement Friday night, just a little more than eight years after its parent companies paid $3.8 billion to the state for the right to operate and collect tolls on the road.
The bankruptcy will be a pre-packaged Chapter 11 bankruptcy, meaning ITR has already struck agreements with its lenders and creditors to either sell the lease or refinance ITR's existing debt, according to Paula Chirhart, a senior vice president for Macquarie Group Limited, a parent company of ITR.
ITR officials were anxious to assure the public Friday night operation of the road will continue unhindered and all aspects of its lease agreement will be adhered to throughout the bankruptcy proceedings.
“Our customers, communities, employees and vendors will not experience any changes in operations during the course of this restructuring process,” said ITR CEO Fernando Redondo in a prepared statement. “We will continue to deliver on our commitment to providing reliable and safe road operations.”
Despite yearly toll increases, Indiana Toll Road revenues have never lived up to what investors expected when the lease deal was struck in June 2006.
The first blow came with the completion of years of construction on the Dan Ryan Expressway shortly after the lease was signed. Without the construction delays, many Toll Road commuters returned to using the free expressway. The second blow to Toll Road revenues came with the Great Recession.
State officials have sought to offer assurances that business on the Toll Road will continue as usual ever since reports emerged earlier this year that ITR might have to declare bankruptcy.
The Indiana Finance Authority (IFA) on August 26 sent ITR a letter giving the company 90 days to show it can meet its debt obligations to its lenders in compliance with the lease agreement, according to Indiana Toll Road Oversight Director James McGoff.
If the lease is put up for sale, any new owner must be approved by the Finance Authority before the sale can be completed, McGoff said last week. In the meantime, the IFA will enforce all lease provisions regarding road maintenance and operations.
The IFA adamantly declared last week the road continues to be owned by the State of Indiana and would be returned to the state if ITR does not live up to the requirements of the lease.
The toll schedule laid out in ITR's lease agreement with the Indiana Finance Authority will continue to be adhered to, Chirhart said. Vendors will also be paid on schedule.
Construction projects underway, such as the Lake Station interchange reconstruction, will continue, Chirhart said. All employees will continue to be paid subject to bankruptcy court approval.
The Chicago Skyway, which has essentially the same operating company, is completely unaffected by the upcoming bankruptcy filing for the Indiana Toll Road, Chirhart said. Its financing will not be part of the bankruptcy filing.
More than 85 percent of secured lenders and 98 percent of voting creditors have already given their support to the plan, well in excess of the threshold required, according to ITR.
The Chapter 11 plan to be filed in United States Bankruptcy Court in the Northern District of Illinois on Monday anticipates that if the lease agreement is not sold, ITR will complete its reorganizational bankruptcy and emerge with substantially lower debt.
The Associated Press contributed to this story.
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