Toll Road Bailout Hits Snag

A search for alternative ways to save the failing San Joaquin Hills tollway crumbed Wednesday evening when the bond insurance company for Orange County’s toll road authority announced it would back only a proposed merger of highway operations and a $4-billion bond deal.

During a six-hour committee meeting at the Transportation Corridor Agencies in Irvine, officials for MBIA Inc. said they probably would not insure any of six new proposals to keep the San Joaquin Hills tollway from defaulting on $1.9 billion in bonds.

The committee of six TCA board members was created two weeks ago to review plans to combine the operations of the San Joaquin Hills tollway with the more successful Foothill-Eastern corridor and refinance their debt with a $4-billion bond issue.

Last week, seven possible alternatives to the consolidation plan were submitted to the committee for consideration. One suggestion was withdrawn this week.

The remaining ideas included partial refinancings, two plans to use surplus toll revenue from the Foothill-Eastern to help pay the San Joaquin’s debts, and a proposal by Cofiroute Global Mobility, a French toll road company, to guarantee the highway’s debt for 15 years in exchange for a management contract.

But discussion of those proposals ended abruptly Wednesday evening after Tom McLaughlin, an MBIA director in the company’s San Francisco office, told the committee: “We are not confident we would be willing to provide insurance on any of the plans.”

MBIA has insured billions of dollars in bonds sold to build the San Joaquin Hills and Foothill-Eastern toll roads. The company has announced that it is willing to insure about $1.7 billion in bonds if the two highway operations are merged and refinanced.

McLaughlin said the new proposals are unattractive because they are not comprehensive solutions for the San Joaquin’s financial problems and would violate TCA agreements with bondholders to take in $1.30 in revenue for every dollar spent on expenses and debt service.

Orange County Supervisor and TCA board member Bill Campbell, who helped create the review committee, said that if MBIA was not willing to insure any of the proposals, there was no point in discussing them further.

“If they aren’t going to do any of the transactions, why waste our time?” Campbell said. “There is nothing else we can do when Wall Street holds a gun to our head.”

The review committee is scheduled to meet next week to discuss the merger and the $4-billion refinancing.

The committee is set to review a fixed-rate bond deal and one that includes $1 billion in interest rate swaps with financial institutions.