A Bump In The Road (Part 2)

Could private roads really work?

Source: Wikipedia

Yesterday’s discussion of pot-holes and private roadways came amidst news of a big toll-road bankruptcy. The operator of the Indiana Toll Road filed to restructure its $6 billion in debt.

In 2005 the State of Indiana sold the operating rights to its Toll Road for $3.8 billion—twice as much as analysts expected. But the company that won the deal had overly optimistic assumptions. They still made $460 million in capital improvements, adding lanes and installing EZ-Pass stations. But they couldn’t cover the debt-service.

Drivers and taxpayers won’t be affected: there will be no bailout, and tolls won’t rise. Instead, debtholders will take a haircut, equity investors will be wiped out, and there will likely be a new operator. Toll roads can be risky investments: in recent years there have been restructurings in Alabama, California, Colorado, Michigan, and South Carolina toll-ways.

But that doesn’t mean the State needs to run them. The State may own the land, but it’s a business to operate the lease. And if that means less traffic and fewer potholes, it’s a good thing.


Douglas R. Tengdin, CFA
Chief Investment Officer
Phone: 603-224-1350
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By | 2017-07-17T12:34:14+00:00 September 24th, 2014|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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