In March 2010, SBX LP filed for bankruptcy. The primary cause of the bankruptcy filing was ongoing litigation related to claims by the contractor that built the SBX project. The SBX opened to traffic in late 2007, shortly before the 2008 recession, and toll revenue steadily declined falling well short of original projections. At the time of bankruptcy, the toll road had approximately half of the traffic volume estimated by investors in 2003. In December 2009, SBX LP, the equity partners, and senior lenders signed a standstill agreement, halting payments until restructuring negotiation was complete. This step was seen as the first alternative to the bankruptcy.
SBX LP's reorganization plan, which was confirmed by a bankruptcy court in April 2011, settled the litigation with the contractor and established a new concession company (SBX LLC) under the ownership of TIFIA and the project's commercial lenders, who would share future toll revenues. Under the reorganization plan, TIFIA's $172 million outstanding balance was broken into a new $93 million secured loan along with a $6 million equity stake in the new company. This left a $73 million unsecured balance on the original loan, although TIFIA was scheduled to recapture more than 90 percent of the original loan by the final maturity date of 2042.
Soon after the reorganization, SANDAG expressed its interest in purchasing the lease of SBX from the new owners. SANDAG had experience operating the county's priced managed lanes on I-15 and its offer was more attractive than private sector offers because it could issue tax-exempt bonds, and incur no income or property taxes. Together these attributes were valued at an estimated $65 million and would enable SANDAG to reduce toll rates on the SBX. In 2009, a study of potential debt recovery options was completed. It revealed that under the terms of a private offer, the estimated debt recovery was $220 million over the existing 35-year concession. However, the public offer was more favorable, with an estimated debt recovery of $442 million due to the use of tax-exempt bonds over the concession period.
Under the terms of the $341.5 million sale, which closed in December 2011, TIFIA issued a new $94.1 million loan under the same terms as in the reorganization plan and received a cash distribution of $15.4 million. TIFIA's ultimate recovery of the loan depends on roadway performance. However, the credit quality of the cash flow stream improved significantly after the sale to SANDAG. Although the principal amount of the original loan was reduced, based on the credit attributes of the restructured loan and the higher interest rates, the TIFIA program is positioned to realize 100 percent of the original loan balance, not including interest. SANDAG also paid off SBX's commercial creditors, whose loans had been restructured in the bankruptcy reorganization, using funds from its TransNet regional sales tax revenue.
Despite losses absorbed by equity investors and the contractor, SBX customers and the local government felt no negative impact during the bankruptcy and sale to SANDAG. Soon after completing the sale of the SBX, SANDAG lowered toll rates by as much as 40 percent on the facility to attract more local and through traffic and relieve congestion on I-805, a parallel route. Tolls have not risen above the limit set in the original concession agreement. Control of the SBX is scheduled to revert to Caltrans in 2042 under the terms of the original franchise agreement. SANDAG also realized good value for money from its purchase, as it paid $341.5 million for a road that had cost its private investors $658 million to build.