Oct. 26 (Bloomberg) -- Connector 2000 Association Inc., a nonprofit company that runs a South Carolina toll highway, filed its plan to repay creditors and restructure its debt of more than $300 million.
The company filed a plan for adjusting its debt and the terms of its current toll-revenue bonds Oct. 22 in U.S. Bankruptcy Court in Spartanburg, South Carolina. Connector 2000 is a public-private partnership that operates the highway and issued bonds to finance its construction.
The association, based in Piedmont, South Carolina, filed for Chapter 9 bankruptcy in June after toll revenue fell short of projections. Chapter 9 is the section of the bankruptcy code used by government entities seeking to restructure debt.
South Bay Expressway LP, another developer and operator of a nine-mile toll road near San Diego, filed a Chapter 11 bankruptcy March 22 to restructure more than $500 million in debt. The company also sought court protection, citing unexpectedly low traffic levels on the road and litigation expenses. That toll road opened in November 2007.
Connector 2000 was formed in 1996 to finance and operate the 16-mile toll road known as the “Southern Connector” in Greenville County. It also built the South Carolina Highway 153 Extension, a feeder road, according to court documents. Original projections were for the highway to get about 21,000 tolls a day after it opened. The Southern Connector has logged about 7,500 tolls a day, according to court papers.
The South Carolina Department of Transportation objected to the company’s bankruptcy filing and sought dismissal of the case, claiming Connector 2000 isn’t eligible for protection from creditors under Chapter 9 because it isn’t a municipality, according to court documents.
Under the Bankruptcy Code, a municipality is defined as a “political subdivision or public agency or instrumentality of a state.”
Connector 2000 officials counter that the firm is an instrumentality of the state because it’s “a nonprofit corporation subject to the control” of the state “to issue tax exempt debt” to finance the highway.
The Department of Transportation’s authority to set toll rates and approve Connector 2000’s directors is further evidence of its eligibility as a municipality, the company said in court filings.
The plan can’t be approved until a judge decides whether Connector 2000 can seek Chapter 9 bankruptcy protection. A trial on that issue is set for Dec. 6.
The company estimates bondholders are owed about $328.8 million, according to court documents.
Bondholders, referred to as Series 1998A and Series 1998B holders, are owed about $237.8 million, the papers show. The creditors would share $172.1 million in so-called Tier 1 bonds that would have first priority for repayment under the proposed plan.
The bonds would mature 2051 accruing interest at 5.8 percent, paid semi-annually in cash. The bondholders also would get $29.8 million in Tier 2 bonds, which would have secondary priority for repayment.
Subordinate holders of the Series 1998C bonds, owed about $90.9 million, would get $4.2 million in Tier 3 bonds if they support the plan, court papers show. They would get nothing if they reject the proposal.
Connector estimates about 83.5 percent of its projected net revenue for each year would be used to make payments on the Tier 1 bonds. The payments on the Tier 2 bonds would consume 14.5 percent of net revenue, while Tier 3 bonds would use 2 percent.
The case is In re Connector 2000 Association Inc, 10-04467, U.S. Bankruptcy Court, District of South Carolina (Spartanburg).
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