Indiana inched closer yesterday to defaulting the bankrupt concessionaire and prime contractor on a highway P3, instructing the company in a formal notification to pay $9 million owed to contractors on the project by next week.
The Indiana Finance Authority told I-69 Development Partners in its notification letter that several contractors have left or are threatening to leave the project because of unpaid, undisputed invoices.
One company owed $2.3 million, Crider & Crider, is not performing work and threatens to demobilize its equipment, the letter says. An employee of the company who answered a phone call declined a request for an interview to confirm the amount.
“The state expects contractors working on this project and all projects to be paid on time,” said Indiana Public Finance Director Dan Huge in a statement released Sept. 7. “The IFA is taking decisive action to protect taxpayer and motorist interests and hold our developer accountable.”
The IFA had issued previous notices of non-performance, the statement added, and has the right to hold I-69 Development Partners in default of its contract as early as next week.
This is Indiana's second transportation public-private partnership-related bankruptcy in two years, and both involved companies based in Spain.
The first one came in 2014 and involved a toll road concession granted to ITR Concession Co., which had a Spanish-Australian parent company. In 2006 the state had granted it a 75-year lease for a 157-mile tollway in northern Indiana.
ITR Concession had overestimated the toll road traffic flow. Because that project involved an already-constructed highway, no apparent hardship was inflicted on local engineering and contracting companies.
Section 5 of I-69 is a different kind of problem.
In 2014, a company related to Spain’s Grupo Isolux Corsan Finance B.V. bested three competitors to win the right to upgrade an existing road and operate it as Section 5 of Interstate 69, a 21-mile extension of the highway from Bloomington to Martinsville. The Isolux entity, Isolux Infrastructure Netherlands B.V., and its partners operated as I-69 Development Partners. It made a $40.5 million equity investment and took on $252 million in debt to bondholders.
With construction scheduled to wrap up later this year, the project was meant to be part of Isolux’s expansion strategy in North America, where it had built high-voltage transmission lines in Texas and held additional contracts. A call to the company’s Austin, Texas office resulted in an electronic pulsing that usually means the line is no longer in use.
Unpaid Invoices
Trouble on the Indiana highway project became public in April, 2016, when the Indianapolis Star reported that the state’s Dept. of Transportation ordered I-69 Development Partners to pay contractors. The company was said to have left some firms unpaid for nine months.
More recently, the depth of trouble at Isolux became apparent. In May the company sold its interest in I-69 Development Partners to a new company, called Roadis. Then in July Isolux Corsan successfully negotiated a reorganization plan with “support” from creditors and filed for the equivalent of bankruptcy protection in courts in Spain and the Netherlands. On July 29, Isolux-related entities that backed its debt filed for protection under Chapter 15 of the U.S. bankruptcy code in federal bankruptcy court in New York City.
Last month, the Herald Times in Bloomington, Ind., reported that I-69 Development Partners had “issued default notices to subcontractor Isolux Corsan for failure to promptly pay subcontractors and for falling behind on a remedial completion schedule for Section 5 of Interstate 69.”
In other words, the concessionaire that used to include Isolux on the P3, but no longer includes Isolux, was ordering Isolux, the P3's prime contractor/design builder, to pay up.
Then Fitch, the bond rating company, lowered the rating to junk level on the $252 million in bonds sold on behalf of Isolux by the Indiana Finance Authority.
So far, my calls today could not reach an authorized source at either I-69 Development Partners’ office. Neither could I immediately reach someone at Force Construction, an important project subcontractor, to tell us what it could about money owed or paid.
If I-69 Development Partners, and Isolux, have the funds to press ahead with construction without using the contractors and subcontractors as a financing source via unpaid invoices, great. Otherwise I’d want to know what surety bonds, letters of credit or other security are in place.
This story was updated September 26, 2016 to reflect the fact that Isolux had partners in I-69 Development Partners. It was updated again September 27 to reflect that Isolux no longer had an interest in I-69 Development Partners.
