I-69 construction woes lead to another bond downgrade

Continuing delays on the construction of Interstate 69 between Bloomington and Martinsville have led to another ratings downgrade on the bonds issued to help finance the project.

Standard & Poor’s has lowered its rating from BB+ to BB- on $244 million in bonds issued by the Indiana Finance Authority in 2014 for the interstate project.

“The rating action reflects our view of increased construction risk at the project, which is eight months behind schedule and about 56 percent complete,” S&P Global Ratings credit analyst Tony Bettinelli said in the ratings agency’s statement on the downgrade last week.

The 21-mile project, which involves upgrading Indiana 37 to interstate standards, began in 2014 and was originally supposed to be completed by October 2016. But this spring, planners changed the estimated completion date to June 2017 while they await a new construction schedule.

The state selected I-69 Development Partners LLC to design, build, finance, operate and maintain the project. I-69 Development Partners, in turn, selected Isolux Corsan as the project’s construction contractor.

Earlier this month, the Indiana Finance Authority issued a notice of non-performance to I-69 Development Partners, noting that Isolux Corsan owed more than $2.3 million to one of its subcontractors. That subcontractor, earth-moving company Crider & Crider Inc., halted work on the project because of the payment delay, the Associated Press reported.

S&P also kept its negative credit watch on the I-69 bonds, which the ratings agency said “reflects our uncertainty that construction efforts will adhere to the revised substantial completion date and that counterparty relationships could be further strained.”

I-69 Development Partners did not respond to an IBJ message seeking comment on the matter.

In March, S&P downgraded the bonds from BBB- to BB+, which according to that agency’s rating scale moved the bonds from the category of “investment grade” to “speculative grade.” S&P also placed the bonds on a negative credit watch at that time.

Fitch Ratings has downgraded the I-69 bonds twice: once in April and again in August. Fitch also cited project delays and contractor non-payments as reasons for its downgrades.

Credit ratings reflect a ratings agency’s opinion on the level of risk associated with a bond issue. Lower ratings reflect a higher degree of uncertainty about whether the issuer will meet its financial obligations.