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Toll-road lease tumbles in value; ailing operator denies talk that it might sell its stake.

Article Excerpt
Gov. Mitch Daniels expected his unprecedented $3.8 billion Indiana Toll Road lease to last 75 years. It may be tested after just three.

The foreign companies that privatized the property haven't escaped the global economic downturn. As a result, the value of their investments has plummeted. Now, as they labor to shed enormous debt loads, analysts and the financial media are abuzz that the Indiana Toll Road lease could change hands.

In June 2006, Indiana struck a deal with Australia-based Macquarie Group Ltd. and Spain-based Cintra Concesiones de Infraestructuras de Transporte SA. Indiana got $3.8 billion upfront, money it's used across the state to fund the Major Moves highway improvement initiative.

In exchange, the investors bought the right to collect tolls, with the obligation they manage, maintain and upgrade the road.

If the companies sell the lease, the new owners would take over that duty. Or if Macquarie and Cintra retain the lease but fail to live up to its terms, Indiana gets its toll road back.

The outlook for the state of Indiana might be least favorable under the status quo. That's because the companies could try to dig themselves out of their financial hole by continuing to aggressively raise tolls.

Getting the road back, on the other hand, wouldn't necessarily be an unfavorable turn of events for the state. Indiana would be on the hook for future improvements, but also would receive the toll revenue--which totaled $155 million last year.

Retaining ownership might be the most appealing option for Macquarie and Cintra, since any sale likely would reap a fraction of what they paid. Recent write-downs by Macquarie suggest the same lease deal today could fetch as little as $445 million.

Both companies have...