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Follow TURFDefault coming? Cintra's SH 130 may receive credit downgrade
Light 130 traffic prompts credit review of toll debt
By Ben Wear
American-Statesman Staff
March 26, 2013
The privately operated section of the Texas 130 tollway south of Mustang Ridge is attracting about half the predicted traffic, according to Moody’s Investor Service, prompting it to investigate downgrading credit ratings for more than $1.1 billion in debt attached to the toll road.
Meanwhile, toll rates for trucks on the entire length of the tollway, from Seguin to north of Georgetown, will likely be lowered for one year to encourage more traffic. That move is expected to put a dent in revenue, however.
Also, the Texas Transportation Commission on Thursday will consider higher speed limits on a portion of the frontage roads alongside the 85 mph toll road, which could spell more bad news for the tollway, likely steering some traffic toward the free lanes.
The SH 130 Concession Co., a partnership of Spanish tollway company Cintra and San Antonio-based Zachry Construction Corp., over the past several years built the $1.3 billion, 41-mile road with its own equity and debt — including $430 million borrowed from the federal government — and is operating it under a 50-year contract with the Texas Department of Transportation. Neither the company nor TxDOT has released traffic or revenue figures for the road, which opened Oct. 24 and began charging tolls on Nov. 11.
But Moody’s apparently has gleaned at least a rough idea of traffic volume and toll revenue on those four lanes in southern Travis, Caldwell and Guadalupe counties, and wasn’t impressed with the early results.
“While the operating history is very limited,” Moody’s analysts said in a five-page, March 21 credit opinion, “the magnitude of the shortfall from original projections warrants a review of the rating category.”
The report said that because of weak revenue, the concession company could exhaust one “liquidity” account by June, but has least an additional $30 million to draw from. Cintra’s parent is Ferrovial S.A., a Spanish corporation with toll roads worldwide that could potentially serve as a financial backstop for poor performance of this road.
Moody’s spokesman Eduardo Barker said the credit review would be complete in no more than 90 days.
Releasing notice of the review, Barker said, “indicates some concerns, and we’re taking a look to see if our concerns are real.”
TxDOT’s contract with the concession company lays out complex procedures to determine how much TxDOT would pay the concession company to take over the road in the event of a default or for any other reason. The Moody’s report doesn’t mention the possibility of default.
Chris Lippincott, a spokesman for the concession company, said it is meeting “contractual obligations to operate and maintain a world-class highway. We remain confident that the recently opened SH 130 … will benefit our investors and the people of Texas.”
The transportation commission — which has operational control of Texas 130’s northern 49 miles but not the Cintra-Zachry section — Thursday will likely approve cutting truck tolls by two-thirds for the next year on the tollway as well as on connecting toll road Texas 45 Southeast. Multi-axle trucks, beginning Monday, would pay the same tolls as passenger vehicles and pickups.
The concession company has agreed to charge all vehicles the car rate as well during that period. That means that a truck, rather than paying as much as $61 to travel the entire 90 miles of Texas 130, would pay just over $17. In both cases, those are the pay-by-mail rates. A truck equipped with an electronic toll tag would pay 25 percent less.
TxDOT, in announcing the toll reduction for big trucks, said it was done to ease congestion on parallel Interstate 35. But the change, which TxDOT estimates will reduce toll revenue on Texas 130 and Texas 45 Southeast by $11 million over the next year, also could introduce some truckers to the high-speed tollway. The speed limit is 80 mph on the TxDOT section and 85 mph on the Cintra-Zachry section.
TxDOT said in a March 13 press release that it “cannot offer the discount permanently since it must repay debt on toll revenue pledged.” But once tolls go back to their current levels in March 2014, some truckers who experienced time savings and lighter traffic on Texas 130 could choose to keep using the road.
The $11 million in lost revenue will be made up from $140 million in lease payments that the SH 130 Concession Co. paid to TxDOT for the right to build, operate and possibly profit from the road. TxDOT spokesman Bob Kaufman said some of that money will go back to the concession company.
The commission Thursday will also ponder whether to raise the 50 and 55 mph speed limits on frontage roads alongside Texas 130 between Mustang Ridge and Lockhart.
The tollway lies on top of what was U.S. 183 for several miles, and most of this stretch had a 65 mph speed limit before Texas 130 construction began in 2009. Many Caldwell County residents, and their elected representatives, were angered when the transportation commission in August set the lower limits.
TxDOT staff has now conducted more speed surveys and is recommending a 65 mph speed limit for about 12 miles from west of Lockhart to south of Mustang Ridge. The five miles or so of frontage road through that small town, whose council recently said it supported the slower speed because of safety concerns, would be set at 60 mph.