Throughout the world, toll road projects go bankrupt or face increasing risks according to Fitch Ratings.
October 9, 2013
Fitch Ratings, sees
trouble ahead for toll road projects and public private partnerships in
general. In a report issued Monday, the credit rating agency outlined
the failures of tolling and related projects in the United States and
around the world, though the agency remains optimistic on the viability
of this road funding mechanism.
"While one can view public
private partnerships as a glass half full or as a glass half empty, it
is Fitch's view that the former is the better perspective," the analysts
explained. "Public private partnerships can provide public value, but
need to be carefully crafted to address all stakeholder concerns. When
public private partnerships are viewed to have failed, the issue is
often inappropriate transaction design and application."
can take blame for bad design in the deals where private companies take
control and generate too much profit from a concession. The private
entities take the blame when bankruptcy, cost overruns and debt default
are the result. For a project to work, both sides need to look out for
one another, the analysts argued. Fitch listed a number of failed
projects around the world that suffered from overleveraged assets.
the US, these include the San Joaquin Hills toll road, SouthBay
Expressway, Southern Connector, Santa Rosa Bay Bridge, Dulles Greenway,
Indiana toll road and Pocahontas Parkway," the report explained. "In
Europe, they include the Madrid Radiales in Spain and toll projects in
Portugal. The Tequila Crisis in the mid-1990s caused numerous projects
to default on their debt in Mexico. In Australia, the Cross City and
Lane Cove tunnel projects were also exposed to this risk."
claims to have updated its rating criteria with appropriate risk factors
after learning from tolling mistakes. The report cited the Chicago
Skyway as a deal like the Indiana Toll Road with a risky debt structure
built upon accreting swaps that are used to lower early debt service
payments. Canada's 407 ETR was faulted for giving the tolling company an
unlimited right to raise tolls for 99 years. In Virginia, the Elizabeth
River Crossings project is under legal challenge. France, Spain and
Portugal report similar difficulties. Massively overstated traffic and
revenue forecasts have plagued Colorado's Northwest Parkway, the State
Highway 130 toll road in Texas and England's M1 Toll Road.
there have been many issues with public private partnerships, this is
not necessarily an indictment on public private partnerships," the