Oct. 8 (Bloomberg) -- Macquarie Capital Inc., a unit of Australia’s biggest investment bank, has been hired by bondholders as restructuring adviser involving a South Carolina toll-road agency, according to a disclosure by trustee U.S. Bancorp.

The Southern Connector, a 16-mile (26 kilometers), four- lane highway in Greenville, South Carolina, will default on more than $320 million of debt on Jan. 1, without a restructuring, the trustee said in an Oct. 1 notice.

“We’re overleveraged, so where do you go from there?” said John Van Duys, general counsel for Connector 2000 Association Inc., the non-profit corporation that operates the road. “We’re not the only ones.”

More than $12 billion of municipal bonds have defaulted in 2008 and 2009, according to the Distressed Debt Securities Newsletter as the worst economic slump since the Great Depression, reduces sales and income tax revenue. Moody’s Investors Service in June cut its outlook on government-owned toll roads to negative, citing the impact that unemployment and reduced demand for consumer goods would have on traffic and revenue.

The Southern Connector, which opened in 2001 as a beltway around the city of Greenville, was built to open the southern part of Greenville County to industrial development. Traffic on the toll road, declined 3.2 percent last year, to about 15,500 daily transactions, according to the annual report from the road’s operator.

The Southern Connector collected $5.2 million in revenue in 2008. There were about 5.7 million toll transactions in 2008, compared with an initial projection of 12.7 million.

Institutional Holders

“It’s pretty far off projections,” Van Duys said. “There’s not a whole lot of big heavy industry built in this country.”

Southern Connector bonds with a 5.375 percent coupon maturing in 2038 traded at 20 cents on the dollar, to yield 26.9 percent on Sept. 30.

The Macquarie Group manages more than $50 billion in equity invested in infrastructure globally and holds leases or operates four U.S. toll roads, including the Chicago Skyway and the Indiana Toll Road.

Macquarie Capital will be paid a monthly advisory fees and “success fees” depending on the outcome of the restructuring. The fees could range from $750,000 to $4.63 million for a sale of the Southern Connector that pays off the bonds in full at par, according to the trustee.

Institutional holders of the Southern Connector bonds, as of June, included OppenheimerFunds Inc’s Limited Term Municipal Fund and Wells Fargo’s Advantage Short-Term Muni Bond Fund. The debt includes zero coupon bonds.

In August, the South Carolina Department of Transportation, at the request of the Southern Connector, agreed to raise tolls. Even with the higher fees, the road can’t meet debt service, the trustee said.

The Southern Connector has drawn on reserves to pay bondholders.

To contact the reporter on this story: Martin Z. Braun in New York at mbraun6@bloomberg.net.

Last Updated: October 8, 2009 06:00 EDT