The Louisiana Public Facilities Authority is preparing to price $1.33 billion in Baa3-rated toll bonds next week for a public-private partnership to replace the Calcasieu River Bridge. This massive project is expected to have maturities well into the mid-21st century and will be managed by JPMorgan and Wells Fargo.
One of the main concerns with this project is that the bonds will be backed by toll revenues. While this is a common practice for infrastructure projects of this scale, there remains some hesitation due to the possibility of drivers choosing alternate routes to avoid paying a toll. This could potentially impact the revenue generated from toll collections and put the project’s financial stability at risk.
Partnership Details
The project is structured as a design-build-finance-operate-maintain and will involve multiple stakeholders, including the Louisiana Department of Transportation and Development. Calcasieu Bridge Partners LLC, a joint venture between Plenary Americas US Holdings, Inc., Sacyr Infrastructure USA LLC, and Acciona Concesiones S.L., will be the developer for the project.
Bond Ratings and Risks
Moody’s Ratings has assigned a Baa3 rating to the toll bonds, its lowest investment-grade rating, with a stable outlook. One of the main risks associated with this project is the uncertainty surrounding toll collections. If toll revenues are insufficient to cover debt service payments, Calcasieu Bridge Partners will bear the financial burden.
While there are concerns about toll collection and revenue, there are also potential benefits to the project. The new bridge and highway widening project aim to replace a structurally deficient bridge and improve transportation infrastructure in the region. The project will also receive funding from state and federal governments.
Institutional investors are expected to show interest in this deal, but individual investors may face challenges due to the uncertainty of construction periods and driver behavior post-opening. The bonds being subject to the alternative minimum tax (AMT) is another factor to consider, as this could impact demand for the bonds.
The project is compared to other successful public-private partnership (P3) projects, such as the Tappan Zee replacement in New York. These successful projects have helped increase acceptance of the P3 approach, which could bode well for the Calcasieu River Bridge project.
The Louisiana Public Facilities Authority’s Baa3-rated toll bond project for the Calcasieu River Bridge replacement is a significant infrastructure undertaking with both benefits and risks. While there are concerns about toll revenue and investor demand, the project’s potential to improve transportation infrastructure in the region is a promising development. Investors and stakeholders will be closely watching the progress of this project as it moves forward.