This article in the Ft. Wayne Journal Gazette points out that “Reports both nationally and internationally have heated up in recent weeks questioning the financial health of the foreign companies that leased the Indiana Toll Road three years ago, but state officials are maintaining their cool.”
The article goes on to discuss fears that have been raised about what might happen to the road the public users of it if one of the companies that leased it folds, or stops maintaining the road etc., and why the state thinks they are well protected from such worries. The most interesting part of the article though is this Q&A:
Q. What would happen if the lease owners or operator stops maintaining the road?
A. Under the lease, the Indiana Toll Road Concession Co. is required to adhere to a vast array of operating standards. This includes how quickly potholes are filled and snow is removed and making hundreds of millions in capital investments to reduce congestion.
Kitchell said the lease sets up a dispute resolution process that could ultimately end with an Indiana arbitrator finding the operator in default and voiding the lease.
The state is even allowed to go ahead and “cure” problems on the road and bill the operator while this process is ongoing.
Q. Can Cintra or Macquarie sell its ownership stake in the lease?
A. Yes. Under the agreement, if there is a change in control — 50 percent or more of the interests — the state has no say if it is transferred to an entity in the U.S., Canada, Europe or Australia. But if the new owner would come from somewhere else, the state would have to consent.
Q. What would happen if the operators of the road would change?
A. Kitchell said because the operator has day-to-day control of the road, the state would have to approve any such change.
Q. If there is a default of some kind or a bankruptcy, can Indiana get the road back and lease it again?
A. Possibly. Kitchell said the consortium had to borrow much of the lease price to start with and the lenders could protect their investment by stepping in and finding new operators before it got to that point. But theoretically, the state could get the rights to the road back under the right circumstances.
Q. What could the state get if it sold the lease again?
A. Less than $3.8 billion.
With traffic counts declining on the Toll Road and the credit market tight, Kitchell said the state likely wouldn’t receive bids anywhere near as high. In fact, he pointed to one recent analysis that found the value of the lease has plummeted to just $445 million in three years.
Regardless of all the theoretical questions, Kitchell makes clear that he and other state officials are happy with the lease so far, noting improvements in congestion and electronic tolling while pointing to toll increases and maintenance deferral in other states.
“Folks that seem to be worried about what’s going on with Macquarie are not focused on what we think is most important — how the road is being maintained and operated,” Kitchell said.