Hoosier lawmakers root for quick cash
Indiana Gets $3.85 Bln Bid From Macquarie-Cintra for Toll Road
Jan. 23 (Bloomberg) -- Indiana, looking to raise money for highway repairs, was offered $3.85 billion in a joint bid from Australian and Spanish companies seeking to buy a toll road that spans the state between Chicago and Ohio.
The bid, from Australia's Macquarie Infrastructure Group, the world's largest developer of toll roads, and Cintra Concesiones de Infraestructuras de Transporte SA of Madrid, marks the most a U.S. municipality has ever been offered for any asset, according to state officials.
"It's unprecedented,'' said Charles Schalliol, Governor Mitch Daniels's budget director, in a telephone interview. "This is a blowout bid for the state.''
Private ownership of major toll highways, a rarity in the U.S., is being seized on by state and city officials as a way to shore up budgets and raise money for infrastructure projects.
Selling the Indiana expressway, which requires approval from state legislators, may allow foreign investors to profit from raising tolls on an artery that carries more than 50 million vehicles a year across the northern part of the state.
The 157-mile (253-kilometer) Indiana Toll Road, nicknamed "the Main Street of the Midwest,'' is a section of the east- west Interstate 90 that runs between Boston and Seattle. Goldman Sachs Group Inc., last year's No. 1 mergers arranger, stands to collect millions of dollars in fees as Indiana's adviser.
'Gigantic'
The bid eclipses the $1.83 billion Chicago got last year for selling its only toll road, a 7.8-mile elevated highway known as the Skyway. That road also was bought by Cintra and Macquarie Infrastructure Group, which is managed by Macquarie Bank Ltd., Australia's largest investment bank.
Bankers involved expected the Indiana Toll Road would top the Skyway, said Conor Kelly, who heads Dublin-based Depfa Bank Plc's six-person infrastructure finance unit for the Americas. Depfa worked with a potential bidder, Kelly said, though he wouldn't name the company.
"It's going to be a gigantic transaction,'' Kelly said in an interview before the winning bid was announced.
Chicago, with its Skyway sale, became the first U.S. government to sell an existing toll road, according to the Washington-based International Bridge, Tunnel and Turnpike Association.
Billions Proposed
While less than 30 of the 5,244 miles of U.S. toll roads are currently run by private operators, according to the group, there are some $25 billion of private investments proposed or committed for new and existing toll roads in six states including Virginia, Texas and Oregon.
The trend is being driven by increasing investment needs as U.S. highways are aging and congestion is worsening, said Martin Wachs, director of transportation research at the Santa Monica, California-based Rand Corp. A growing reluctance by politicians to raise the tax on gasoline, which has funded most federal and state highway construction, also has played a part, he said.
As governments consider selling toll roads, investment banks are gearing up for the millions of dollars of fees that could come from work as advisers on the deals or arrangers of related financing.
Goldman and Chicago-based Loop Capital Markets LLC reaped $12 million in advisory fees on the Skyway sale. Goldman and Citigroup Inc., both based in New York, also managed a $1.4 billion sale of floating-rate bonds in August 2005 to refinance the project.
Four Offers
In Indiana, budget director Schalliol said the state began looking into privatizing the Indiana Toll Road after the Skyway sale. He said the state didn't want to raise the gas tax, and was struggling to find enough money for highway projects.
Schalliol said he had hoped the sale would generate enough to pay for Daniels's 10-year, $2.8 billion plan to overhaul and expand the state's highways. Schalliol said four offers for the toll road were made from six bidders who were considering the project up until the Jan. 20 deadline. He wouldn't identify the other companies or how much they bid for the road, whose tolls range from a $2.70 commuter rate for cars to $28.75 for the biggest trucks.
Daniels, a Republican who was President George W. Bush's first budget director, is proposing higher tolls that would more than double some rates, and phase in increases for trucks. The road links directly to the Skyway, which Cintra and Macquarie began operating in January last year.
Cintra shares today rose 22 cents, or 2.2 percent, to 10.47 euros ($12.85) in Madrid, leading gainers today in the benchmark IBEX 35, which fell 0.3 percent.
Texas Tollway
Cintra, controlled by Spanish builder Grupo Ferrovial SA, was chosen in December 2004 by Texas to invest $6 billion in building a 316-mile highway between Dallas and San Antonio, and then pay the state $1.2 billion for a 50-year contract to maintain the road and collect all toll revenue.
Other companies who said they were pre-qualified by Indiana to bid on the toll road were: Madrid-based Sacyr Vallehermoso SA, Barcelona-based Abertis Infraestructuras SA, Europe's largest toll-road operator, and Fomento de Construcciones & Contratas SA, also of Barcelona.
Sacyr, Spain's fifth-biggest builder, worked on its bid with RBC Capital Markets, according to Chris Hamel, head of U.S. public finance for RBC, the investment-banking arm of Toronto- based Royal Bank of Canada.
RBC late last year hired former Macquarie banker Aaron Barman to head the firm's push to win more toll privatization business, Hamel said.
Banking Business
Mark Florian, a Goldman managing director who advised Chicago and Indiana, relocated in December to New York from Chicago to bolster Goldman's efforts.
"It's not just public finance people being involved,'' Florian said in a previous interview. Goldman's mortgage and derivatives desks were involved with the Skyway bond sale, he said.
Private toll roads have been the norm in European countries such as Spain, Italy and France since the end of World War II, and in Australia and some South American countries such as Brazil and Chile in the last two decades, said Patrick Jones, executive director of the International Bridge, Tunnel and Turnpike Association.
While Indiana legislators must pass a law to allow the sale, Jeff Espich, a Republican from Uniondale who is chairman of the Ways and Means committee of the state House of Representatives, said last week that lawmakers would likely support the plan if the price exceeded $3 billion.
"There's just so much good you can do with that kind of money,'' Espich said in a telephone interview.
To contact the reporter on this story:
Eddie Baeb in Chicago at ebaeb@bloomberg.net.
©2006 Bloomberg L.P. www.bloomberg.com
Jan. 23 (Bloomberg) -- Indiana, looking to raise money for highway repairs, was offered $3.85 billion in a joint bid from Australian and Spanish companies seeking to buy a toll road that spans the state between Chicago and Ohio.
The bid, from Australia's Macquarie Infrastructure Group, the world's largest developer of toll roads, and Cintra Concesiones de Infraestructuras de Transporte SA of Madrid, marks the most a U.S. municipality has ever been offered for any asset, according to state officials.
"It's unprecedented,'' said Charles Schalliol, Governor Mitch Daniels's budget director, in a telephone interview. "This is a blowout bid for the state.''
Private ownership of major toll highways, a rarity in the U.S., is being seized on by state and city officials as a way to shore up budgets and raise money for infrastructure projects.
Selling the Indiana expressway, which requires approval from state legislators, may allow foreign investors to profit from raising tolls on an artery that carries more than 50 million vehicles a year across the northern part of the state.
The 157-mile (253-kilometer) Indiana Toll Road, nicknamed "the Main Street of the Midwest,'' is a section of the east- west Interstate 90 that runs between Boston and Seattle. Goldman Sachs Group Inc., last year's No. 1 mergers arranger, stands to collect millions of dollars in fees as Indiana's adviser.
'Gigantic'
The bid eclipses the $1.83 billion Chicago got last year for selling its only toll road, a 7.8-mile elevated highway known as the Skyway. That road also was bought by Cintra and Macquarie Infrastructure Group, which is managed by Macquarie Bank Ltd., Australia's largest investment bank.
Bankers involved expected the Indiana Toll Road would top the Skyway, said Conor Kelly, who heads Dublin-based Depfa Bank Plc's six-person infrastructure finance unit for the Americas. Depfa worked with a potential bidder, Kelly said, though he wouldn't name the company.
"It's going to be a gigantic transaction,'' Kelly said in an interview before the winning bid was announced.
Chicago, with its Skyway sale, became the first U.S. government to sell an existing toll road, according to the Washington-based International Bridge, Tunnel and Turnpike Association.
Billions Proposed
While less than 30 of the 5,244 miles of U.S. toll roads are currently run by private operators, according to the group, there are some $25 billion of private investments proposed or committed for new and existing toll roads in six states including Virginia, Texas and Oregon.
The trend is being driven by increasing investment needs as U.S. highways are aging and congestion is worsening, said Martin Wachs, director of transportation research at the Santa Monica, California-based Rand Corp. A growing reluctance by politicians to raise the tax on gasoline, which has funded most federal and state highway construction, also has played a part, he said.
As governments consider selling toll roads, investment banks are gearing up for the millions of dollars of fees that could come from work as advisers on the deals or arrangers of related financing.
Goldman and Chicago-based Loop Capital Markets LLC reaped $12 million in advisory fees on the Skyway sale. Goldman and Citigroup Inc., both based in New York, also managed a $1.4 billion sale of floating-rate bonds in August 2005 to refinance the project.
Four Offers
In Indiana, budget director Schalliol said the state began looking into privatizing the Indiana Toll Road after the Skyway sale. He said the state didn't want to raise the gas tax, and was struggling to find enough money for highway projects.
Schalliol said he had hoped the sale would generate enough to pay for Daniels's 10-year, $2.8 billion plan to overhaul and expand the state's highways. Schalliol said four offers for the toll road were made from six bidders who were considering the project up until the Jan. 20 deadline. He wouldn't identify the other companies or how much they bid for the road, whose tolls range from a $2.70 commuter rate for cars to $28.75 for the biggest trucks.
Daniels, a Republican who was President George W. Bush's first budget director, is proposing higher tolls that would more than double some rates, and phase in increases for trucks. The road links directly to the Skyway, which Cintra and Macquarie began operating in January last year.
Cintra shares today rose 22 cents, or 2.2 percent, to 10.47 euros ($12.85) in Madrid, leading gainers today in the benchmark IBEX 35, which fell 0.3 percent.
Texas Tollway
Cintra, controlled by Spanish builder Grupo Ferrovial SA, was chosen in December 2004 by Texas to invest $6 billion in building a 316-mile highway between Dallas and San Antonio, and then pay the state $1.2 billion for a 50-year contract to maintain the road and collect all toll revenue.
Other companies who said they were pre-qualified by Indiana to bid on the toll road were: Madrid-based Sacyr Vallehermoso SA, Barcelona-based Abertis Infraestructuras SA, Europe's largest toll-road operator, and Fomento de Construcciones & Contratas SA, also of Barcelona.
Sacyr, Spain's fifth-biggest builder, worked on its bid with RBC Capital Markets, according to Chris Hamel, head of U.S. public finance for RBC, the investment-banking arm of Toronto- based Royal Bank of Canada.
RBC late last year hired former Macquarie banker Aaron Barman to head the firm's push to win more toll privatization business, Hamel said.
Banking Business
Mark Florian, a Goldman managing director who advised Chicago and Indiana, relocated in December to New York from Chicago to bolster Goldman's efforts.
"It's not just public finance people being involved,'' Florian said in a previous interview. Goldman's mortgage and derivatives desks were involved with the Skyway bond sale, he said.
Private toll roads have been the norm in European countries such as Spain, Italy and France since the end of World War II, and in Australia and some South American countries such as Brazil and Chile in the last two decades, said Patrick Jones, executive director of the International Bridge, Tunnel and Turnpike Association.
While Indiana legislators must pass a law to allow the sale, Jeff Espich, a Republican from Uniondale who is chairman of the Ways and Means committee of the state House of Representatives, said last week that lawmakers would likely support the plan if the price exceeded $3 billion.
"There's just so much good you can do with that kind of money,'' Espich said in a telephone interview.
To contact the reporter on this story:
Eddie Baeb in Chicago at ebaeb@bloomberg.net.
©2006 Bloomberg L.P.
posted by Porkus Maximus Tex: at Monday, January 23, 2006
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