(Reuters) - The foreign-owned operator of a northern Indiana toll road filed for bankruptcy on Sunday as traffic fell short of the projections that underpinned the 2006 groundbreaking deal to privatize the highway.
Indiana Governor Mike Pence said in a statement on Monday the bankruptcy was anticipated and no changes were expected in the operation of the 157-mile road.
The operator, ITR Concession Co LLC, proposed selling itself to the highest bidder in its Chapter 11 bankruptcy to raise money to pay down $6 billion in debt. If a sale isn’t successful, the company plans to turn over ownership to its creditors.
The company will manage the road through the bankruptcy process and any change in its operation must be preapproved by the Indiana Finance Authority. The IFA, in the same statement from Pence, said tolls cannot be increased beyond what is set forth in the operating agreement.
Indiana agreed in 2006 to lease the highway, billed as the Main Street of the Midwest, for 75 years in return for $3.8 billion.
The deal with ITR Concession, owned by affiliates of Australia’s Macquarie Group Ltd (MQG.AX) and the Cintra unit of Spain’s Ferrovial SA (FER.MC), was the largest highway privatization deal in history.
While then-Governor Mitch Daniels described it as the deal of a lifetime, opponents fought the agreement all the way to the state’s Supreme Court, arguing the state was surrendering an important revenue stream.
The deal prompted other states to consider similar lease arrangements.
However, almost as soon as the deal closed, the United States slid into a deep recession and has been slow to recover from a financial crisis in 2008. Traffic volume on the toll road in 2013 was 10.7 percent below the 2007 level, according to documents filed with the U.S. Bankruptcy Court in Chicago.
Similar privatization deals have also been struggling, including toll roads in California and Texas.
ITR Concession filed what is known as a prepackaged bankruptcy, which has already been approved by the majority of creditors. The company will seek approval of its plan from the U.S. Bankruptcy Court in Chicago in 30 days. If approved, the plan would be binding on creditors who did not vote in favor.
The case is ITR Concession Company LLC, U.S. Bankruptcy Court, Northern District of Illinois, No. 14-34284
Reporting by Tom Hals in Wilmington, Delaware; Additional reporting by Karen Pierog in Chicago; Editing by Jeffrey Benkoe