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Indiana Toll Road operator wins approval of bankruptcy plan

October 28, 2014

The operator of the Indiana Toll Road, which paid $3.8 billion for a 75-year operating lease, won court approval of a plan to exit bankruptcy protection in just over a month after working with creditors for years.

U.S. Bankruptcy Judge Pamela S. Hollis in Chicago on Tuesday granted ITR Concession Co. approval of the reorganization plan, which is supported by more than 87 percent of senior secured debtholders and enjoys unanimous acceptance by equity owners.

“This is the end result of over two and a half years of work,” Marc Kieselstein, a lawyer for the company, said at the hearing.

Under the proposal, the company would either be sold through a competitive process or restructured using $2.75 billion in new debt, with almost all the equity going to the secured creditors, according to a court filing.

ITR Concession’s unsecured creditors, owed about $8 million, its only other listed debt, will be paid in full under either scenario.

The sale or restructuring process could run until next August, after the company exits court protection. It won’t need to return for court approval unless a buyer requests the judge’s blessing on a transaction, Kieselstein said.

Open since 1956, the Indiana Toll Road spans 157 miles across northern Indiana, connecting Chicago to major East Coast traffic arteries.

ITR Concession paid Indiana $3.8 billion for a 75-year lease to operate the road in 2006 from the Indiana Finance Authority. Indiana officials say they have no plans to reclaim the road because of the bankruptcy.

In recent years, traffic has dropped on the highway, leading to slower-than-anticipated earnings growth and forcing ITR Concession to devote an ever-greater share of operating income to debt service. The company, owned by affiliates of Macquarie Group Ltd. and Ferrovial SA, sought bankruptcy protection Sept. 21.

ITR Concession listed assets and liabilities of more than $1 billion each, with an estimated $6.3 billion in secured obligations including projected interest through August.

The company has an estimated $2.15 billion secured liability for so-called swaps transactions used to protect against interest-rate fluctuations. As interest rates dropped following the recession and governments took action to stimulate lending, the hedging agreement turned into a liability.

ITR Concession borrowed more than $3.2 billion to fund the acquisition of the 75-year lease, a $150 million liquidity facility to fund early-period interest payments and $665 million to fund capital expenditures through June 2015, according to Macquarie Atlas documents.

ITR Concession is jointly owned by Madrid-based Ferrovial’s Cintra Concesiones and two affiliates of Sydney-based Macquarie, Australia’s largest investment bank.

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