This morning, American Roads, LLC and affiliates voluntarily filed for chapter 11 bankruptcy protection in the Southern District of New York. According to bankruptcy court filings, the company “indirectly owns and operates four facilities in Alabama – the Foley Beach Express, the Emerald Mountain Expressway, the Alabama River Parkway and the Black Warrior Parkway – and leases and operates an international border crossing tunnel between Detroit, Michigan and Windsor, Ontario.” Descriptions of the facilities are included below in this post.
According to court filings, American Roads and its affiliates “have commenced these Chapter 11 Cases to restructure a balance sheet burdened by more than $830 million on account of obligations under the Swaps and the Bonds. A restructuring of the Debtors’ balance sheet is necessary because the Debtors are not able to meet their financial obligations under the Swaps and the Bonds. Since the refinancing of their debt in 2006, the traffic volumes at the Toll Facilities have not grown to a level necessary to support the Debtors’ existing capital structure. Rather than experiencing the traffic growth projected in 2006 when the Bonds and Swaps were issued, the Toll Facilities have experienced significant traffic declines. From 2007 through 2012, traffic has declined by between approximately 1.9% and 8.6% at each of the Toll Facilities.” The extent of the companies’ debt burden is summarized in a single sentence: “During 2012, the Debtors paid approximately $35 million for debt service while generating only $14.2 million in EBITDA.”
The debtors have negotiated the terms of a prepackaged bankruptcy plan of reorganization with Syncora, the insurer of the Swaps and Bonds. Under the terms of the proposed prepackaged plan, the interests in the Reorganized Debtors will be distributed to Syncora. According to American Roads, “the Plan will not provide any recoveries to holders of general unsecured claims. However, the Debtors believe that most general unsecured creditors will be paid in full because they are parties to executory contracts and leases that will be assumed by the Debtors pursuant to the Plan.”
The following paragraphs provide a summary of the facilities owned and leased by American Roads and its affiliates.
The Foley Beach Express Bridge
The Foley Beach Express (the “FBX”) is a 13.5 mile expressway in Baldwin County, Alabama that spans an intra-coastal waterway known as Portage Creek, linking the City of Foley on the mainland of Alabama, to the tourist and resort communities of Orange Beach and Gulf Shores, Alabama. The Baldwin County Commission in Baldwin County, Alabama (the “Baldwin County Commission”) granted a license to BCBC to construct, maintain and operate a toll bridge over Portage Creek (the “FBX Bridge”) (the “Baldwin County License”). The FBX and the FBX Bridge opened to traffic in 2000 to save commuters travel time over two alternative toll-free crossings. The FBX Bridge and its immediate approaches comprise the toll facility that American Roads owns through its subsidiary BCBC.
The FBX Bridge employs one toll plaza, comprised of four collection booths and six toll lanes, that collects tolls for both north-bound and south-bound traffic. Tolls are charged in each direction of the FBX Bridge and no tolls are charged at any other point on the FBX. Approximately 6,300 vehicles traveled the FBX Bridge daily in 2012. Over the six-year period from 2007 through 2012, traffic on the FBX Bridge decreased at a compound annual growth rate of 5.1% per annum, the average toll rate at the FBX Bridge increased at a compound annual growth rate of 4.2% per annum, total revenue from the FBX Bridge decreased at a compound annual growth rate of 1.2% per annum and EBITDA from the FBX Bridge increased at a compound annual growth rate of 2.1% per annum.
The Alabama River Parkway Bridge
The Alabama River Parkway (the “ARP”), comprising a toll bridge over the Alabama River (the “ARP Bridge”) and 12.5 miles of four-lane undivided arterial connecting roads, was opened in 1998 providing direct access from the cities of Millbrook, Coosada and Prattville, Alabama across the Alabama River to the northern and eastern portions of the City of Montgomery, Alabama. The ARP also acts as an alternative route from the northern communities surrounding the City of Montgomery to the central business district of Montgomery. Alternative routes to the ARP traffic over the Alabama River from Elmore County and Autauga County to the City of Montgomery are I-65, the main competitor to the ARP, and public road SH-31.
Debtor CARP LLC (formerly known as Alabama River Parkway, L.L.C.) acquired the ARP Bridge in May 2006 pursuant to an asset purchase agreement. Approximately 3,000 vehicles traveled the ARP daily in 2012. Over the six-year period from 2007 through 2012, traffic on the ARP decreased at a compound annual growth rate of 8.6% per annum, the average toll rate at the ARP increased at a compound annual growth rate of 5.4% per annum, total revenue from the ARP decreased at a compound annual growth rate of 3.6% per annum and EBITDA from the ARP decreased at a compound annual growth rate of 3.9% per annum.
The Emerald Mountain Expressway Bridge
The Emerald Mountain Expressway (the “EMX”) is a 4.5 mile two-lane roadway located on the northeast outskirts of the City of Montgomery, which connects Montgomery County, Alabama with the Emerald Mountain community and nearby parts of Elmore County, Alabama and crosses the Tallapoosa River over the toll bridge portion of the EMX (the “EMX Bridge”). The EMX Bridge and connecting roadway were opened in December 1994 to provide (i) commuters from Elmore County working in the business districts of Montgomery a commuting route, (ii) students a more direct route to Auburn University-Montgomery and (iii) consumers a route to shopping in East Montgomery. Growth in the vicinity of the Emerald Mountain community and the adjacent parts of Wetumpka has stagnated since the economic downturn that started in 2007. Alternative access between Montgomery County and the communities on the north side of the Tallapoosa River is offered via the public road SH-231.
EMX LLC acquired the EMX Bridge, as well as the toll plaza and short sections of an adjacent road, in May 2006 pursuant to an asset purchase agreement. Approximately 3,800 vehicles traveled the BWP Bridge daily in 2012. Over the six-year period from 2007 through 2012, traffic on the BWP Bridge decreased at a compound annual growth rate of 3.0% per annum, the average toll rate at the BWP Bridge increased at a compound annual growth rate of 5.7% per annum, total revenue from the BWP Bridge increased at a compound annual growth rate of 2.6% per annum and EBITDA from the BWP Bridge increased at a compound annual growth rate of 4.0% per annum.
The Black Warrior Parkway Bridge
The Black Warrior Parkway (the “BWP”) is a 12.5-mile long undivided four-lane roadway opened in 1998, which provides one of three crossings of the Black Warrior River over the Black Warrior Parkway Bridge (the “BWP Bridge”). The BWP acts as a western bypass of the City of Tuscaloosa and north of the Black Warrior River and provides an alternative route from the cities of Coker and Northport, Alabama across the Black Warrior River to Tuscaloosa, Alabama, acting as a relief road to the Hugh R. Thomas Bridge on US-43/US-69 and the Woolsey Finnell Bridge on US-82. The only toll plaza is on the southern side of the BWP Bridge. A fourth river crossing, the Eastern Bypass, has been constructed; however, connections to the road network are still subject to land acquisition and right of way agreements.
BWP LLC acquired the BWP Bridge, as well as the toll plaza and short sections of adjacent road, in May 2006 pursuant to an asset purchase agreement. Approximately 3,800 vehicles traveled the BWP Bridge daily in 2012, and the total toll revenue for the BWP Bridge in 2012 was $2,564,324. During the last seven years, traffic on the BWP has decreased at a compound average rate of approximately 5.1% per annum. Over the last seven years, the average toll rate at the BWP Bridge has increased at a compound average rate of 10.09% per annum and expenses also increased at a compound average rate of 6.9% per annum.
The Detroit Windsor Tunnel
The Detroit Windsor Tunnel (the “DWT”) is a 5,160-foot long tunnel beneath the Detroit River that has served as a border crossing between downtown Detroit, Michigan, United States and Windsor, Ontario, Canada since 1930. The DWT is a major infrastructure facility that includes toll and inspection plazas on each side of the border. Tolls are paid on entry into the tunnel in each direction and customs and border protection are undertaken on exiting the tunnel. The toll plaza on the Detroit side of the DWT, which was recently renovated in 2011, offers 6 toll booths (4 automatic and 2 attended) and multiple customs inspection booths. The toll plaza on the Windsor side of the DWT, which is currently undergoing major renovation scheduled for completion in 2014, offers 6 toll booths (3 automatic and 3 attended), 10 custom inspection booths and 3 dedicated truck inspection lanes.
Approximately 6,650 vehicles traveled the DWT daily in 2012, of which approximately 98% were cars and about 2% were trucks, buses and miscellaneous vehicles. Over the six-year period from 2007 through 2012, traffic on the DWT decreased at a compound annual growth rate of 3.8% per annum, the average toll rate at the DWT increased at a compound annual growth rate of 2.2% per annum, total revenue from the DWT increased at a compound annual growth rate of 0.6% per annum and EBITDA from the DWT increased at a compound annual growth rate of 10.8% per annum.