Bankrupt Toll Road Operator Has Over $6 Billion In Debt, Victim Of Interest Rate Swap Agreements

The foreign consortium that operates the 157-mile Indiana Toll Road may have paid $3.8 billion for their 75-year lease agreement with the State of Indiana, but bankruptcy documents filed yesterday indicate that its total debt has grown to more than $6 billion since it took over the toll road in 2006. According to the Northwest Indiana Times' Keith Benman, the first emergency petitions filed by the firm controlled by Ferrovial SA, a Spanish infrastructure company, and Macquarie Group, an Australian investment bank, would allow it to continue paying the 283 employees who operate the toll road.

Earlier news reports talked about a greater than 40% decline in vehicle traffic on the ITR following the 2008 Great Recession as contributing to the operator's failure. The firm also attributes interest rate swaps it negotiated with banks to its downfall to a more than 50% growth in its debt. "Those swaps were intended to give ITRCC the security of fixed interest rates on the $4 billion in debt taken on to finance its winning bid in 2006," Benman writes. "But the swaps instead had the effect of swelling its debt by $2.15 billion more as of this summer, according to the bankruptcy filings."

So who has been buying up the heavily discounted debt owed by the ITR from the European banks who loaned the money for the ITR lease? The Wall Street Journals says it's mainly been hedge fund owners, who stand to be the biggest winners if the toll road fetches a good price in a bankruptcy sale. The banks who made the bad lending decisions in the first place have been bailed out by European governments. Never fear. The money changers always wind up on top. It's the little people who always wind up paying the price for their bad decisions.

"And Jesus went into the temple of God, and cast out all them that sold and bought in the temple, and overthrew the tables of the money changers, and the seats of them that sold doves, And said unto them, It is written, My house shall be called the house of prayer; but ye have made it a den of thieves." Matthew 21:12-13.