A deal backed by toll receivables on an eight-mile stretch of highway in Illinois, called the Chicago Skyway Bridge, hit the U.S. ABS market last week. Though toll road-backed deals are somewhat rare in the U.S. market, the deal priced at aggressive levels resembling those of even shorter-dated home equity deals. Chicago-based Skyway Concession Co. issued the Rule 144A transaction, with Citigroup Global Markets and Goldman Sachs as joint leads.
The $1.4 billion two-tranche deal consists of 12-year and 17-year FSA-wrapped tranches priced to three-month Libor. The 12-year A tranche priced at 28 basis points over three-month Libor, while the 17-year tranche priced at 38 basis points over three-month Libor. By comparison, the average spread on a three-year home equity floater was 25 basis points over one-month Libor last week.
"This is a very good asset with a long tenor and no prepayment sensitivity," said one source. "This deal is going to behave as expected." The source noted the deal was attractive to a wide mix of investors looking for longer-dated triple-A assets.
The bonds feature a five-year optional call, in which the issuer can redeem the bonds at 103% of par value, declining by 1% until reaching par after year eight, and remain callable at par every year thereafter. A source familiar with the deal said the call feature did not significantly alter the way investors viewed the deal.
The Chicago Skyway Bridge is a 7.8-mile toll road built in 1958 to connect Interstate 94, known as the Dan Ryan Expressway, to Interstate 90, known as the Indiana Toll Road. The road had been operated and maintained by the City of Chicago Department of Streets and Sanitation, but Cintra-Macquarie Consortium bought it in January for $1.8 billion.
The charge for an average passenger vehicle to cross the bridge is $2.50 each way, with a graduating scale for trucks and commercial vehicles, based on the number of axles on the vehicle. The bridge served $17.4 million motorists in 2003, According to data from the Skyway Concession Co., raising $39.7 million in toll revenue. In 2002, before a massive construction project forced motorists to find alternate routes, the bridge served a record 18.7 million motorists and collected $43 million in revenue.
According to the terms of the deal, Skyway has a 99-year operating lease on the road and will be responsible for all operating and maintenance costs of the road, as well as a 20-year right to all toll and concession revenue. The agreement between Skyway and the City of Chicago is said to be the first privatization of an existing toll road anywhere in the U.S. A source said the Skyway sold ABS now in order to refinance the bridge loan made in January to fund the purchase of the road.
Unlike most other asset classes, there is little past performance data, if any, to project the performance of toll road securitizations. For that reason, a private consultant was hired to provide investors and rating agencies with performance projections and information on the road and its use.
Skyway, the issuer, is owned by the Cintra-Macquarie Consortium, a combined venture between Madrid-based Cintra Concessiones de Infraestructures de Transporte SA, and Sydney, Australia-based Macquarie Infrastructure Group. Cintra Concessiones runs toll roads in countries including Canada, Ireland and Spain. Macquarie Infrastructure bills itself as "one of the largest private developers of toll roads in the world," and has a portfolio that includes toll roads in Australia, Canada, Germany, Portugal, the U.K. and the U.S. Macquarie Securities, the investment banking and brokerage arm of Macquarie Bank Ltd., was also in the selling group on the deal.
Officials from Skyway declined to comment, referring all inquiries to public documents concerning the deal.
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