Pocahontas Parkway to "Defease" on Bonds?
An interesting, if cryptic, announcement has been posted on the Pocahontas Parkway website, the Interstate 895 toll road in the southeast quadrant of the Richmond region. Traffic and revenues have fallen short of projections, and the credit ratings of the toll-backed bonds have tumbled. Now Transurban, the Australian company that has been sniffing around for Virginia toll-road properties, enters the picture.
Here's the full quote from the website:
The Pocahontas Parkway Association (“PPA”) announces that it has along with the Virginia Department of Transportation (”VDOT”) entered into a confidential Memorandum of Understanding with Transurban (USA), Inc. and DEPFA Bank, plc providing for the exclusive investigation and negotiation of a possible agreement relating to the transfer of the PPA’s rights and obligations under the Comprehensive Agreement dated June 3, 1998 with respect to the Pocahontas Parkway (Route 895) toll road in central Virginia. It is contemplated that any final agreement would be completed by the end of 2005 and would involve the defeasing of all outstanding bond obligations of PPA. No further details of the parties’ understanding will be made available unless and until the parties enter into a further agreement or the Memorandum of Understanding and related Confidentiality Agreement terminate by their terms.
James W. Atwell
President
Pocahontas Parkway Association
I'm not sure what the legal definition of "the defeasing of all outstanding bond obligations of PPA" means, but my Websters defines "defeasing" as "rendering null and void." Is this another way of saying that The Pocahontas Parkway is on the verge of defaulting on its bonds? Can someone clarify the significance of this announcement?
Read the original document here.
posted by James A. Bacon @ 1:50 PM
4 comments
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4 Comments:
Hey, it ain't really a privatized project if only the taxpayers are at risk. (Keep that in mind as this plays out, and burn it into your brain for when -- see who does take the fall -- and then burn it into your brain when somebody else starts talking about private tolls roads being our salvation from the evil tax demons.)
Defeasing the bonds means setting aside money in a dedicated account to pay future bond obligations.
The Pocahontas Parkway Association is considering selling the Route 895 public-private partnership to Transurban (USA), and if this is performed, Transurban (USA) could pay the necessary money into a dedicated bond account, to remove the PPA's bond debt, as part of the process of this sale.
Scott, Thanks for clearing that up. That sounds a little less dire than I had feared.
From what I've heard, the traffic this facility is seeing are fractions of what was projected. If Transurban is indeed interested in purchasing 895, either their price is going to be lower, or they will raise the tolls appreciably.
I'd sit back, watch and wait.
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