DALLAS — The State Highway 130 Concession Co., operator of a lightly traveled toll road outside Austin, Texas, says it has renegotiated its loan payment schedule and is not in default, despite an opinion to the contrary from Moody's Investors Service.
"The SH130 is not in default," spokeswoman Megan Compton said in a prepared statement.
"It has reached an agreement with lenders that modifies the payment date such that no failure to pay occurred," she said. "A portion of the payment was made recently and the remainder is due in the future. As a result of the modification, as a matter of fact and as a matter of law, there is no default."
Despite the new terms, Moody's said it considers the partial payment a default.
"By executing the waiver agreement, we understand that the project is not in legal default under its senior loan and swap agreements given the waiver was signed by all senior lenders and swap counterparties," analysts John Medina and Chee Mee wrote in a July 8 report. "However, Moody's view is that the failure to meet the full payment that was originally scheduled for June 30th, 2014 constitutes a 'default' under Moody's definition."
The concession company, a partnership of Spanish toll-road developer Cintra and San Antonio-based Zachry Construction Co., operates a 41-mile section of the 89-mile toll road. The $1.35 billion project opened to traffic in 2012.
The Texas Department of Transportation, which awarded the concession to Cintra-Zachry in 2007, operates the other 50 miles of the toll road as the Central Texas Turnpike Authority.
To qualify for a $438 million federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan, the private companies needed an investment grade credit rating.
In 2008, Moody's rated the concession company's senior-lien debt Baa3 while assigning a junk-bond rating of Ba1 to the subordinate TIFIA debt. The senior bank debt has a final maturity of 2038 and the TIFIA subordinate debt matures in 2047.
On April 12, 2013, Moody's downgraded the $686 million senior-lien debt to B1 and the subordinate-lien to B1, maintaining a negative outlook. Analysts said traffic and revenues were running about half of the projected rate.
On Oct. 15, 2013, Moody's dropped the senior-lien rating to Caa3 from B1, warning that the toll road was headed for default.
The TIFIA loan is not affected at this point because the project is not in legal default, according to Moody's.
Despite the technical default, TxDOT currently has no rights to terminate the concession agreement, according to Moody's.
"TxDOT could terminate the concession under certain conditions, like a project bankruptcy," the analysts wrote. "The project owners continue to satisfactorily operate and maintain the road according to the performance requirements in the concession agreement and the road's condition remains strong given it is relatively new."
Year-over-year traffic and revenue growth continues as the road is in its early ramp-up phase with revenue increasing by about 25% year-to-date in 2014 compared to 2013.
"While strong, the growth is from a lower than forecast revenue base and is inadequate to meet rapidly growing debt service requirements," analysts wrote.
The senior debt interest rate is fixed through swap agreements with five banks: Banco Santander, Caixabank, Bankia, Banco Espirito Santo and BNP Paribas.
One of the banks, the Portugal-based Espirito Santo, has defaulted on its debt, bringing a downgrade by Moody's to Caa2 from B1. The bank's bonds have been trading for 10 cents on the dollar.
The SH 130 Concession Co. declined comment on how the bank's turmoil affected financial negotiations on the toll-road debt.
