Recent Posts

Opinion: Bankruptcy just part of the plan

OPINION. By Nils Lucander. What does it mean to North Carolina taxpayers when Cintra (Ferrovial) bankrupts one of its subsidiaries elsewhere?

When Cintra’s various LLCs—like the ones in Texas, Indiana, Spain, Virginia and North Carolina—file bankruptcy on these highway projects, it is not due to some unforeseen, unusual, tragic circumstances that we might empathize with them over.

The bankruptcies are a “planned for escape hatch” from the massive burden of debt required to finance these projects. In the case of the I-77 toll lanes, the debt will be $300 million.

The LLCs take on tremendous debt to finance construction which allows them to make tremendous profits on that construction. Later, if toll revenues are not enough to pay back the loan, the LLC may file for bankruptcy protection to get out of the terms of the loan.

The result is they get the cash and profits up front, and then either force the court to lower the debt expenses, or they walk away from the debt. The profits they will have made will far surpass any penalty they may need to pay. Its all legal, even though its intentional and unethical.

Each LLC is a separate legal entity. When one LLC files for bankruptcy, it does not directly affect any of the other LLCs. The concern is that Cintra has had many LLCs file bankruptcy, as part of this escape hatch. This shows a pattern that seems to be a strategy. A strategy of get the money, spend it, and bail out on the debt. It happens over and over. The pieces are all in place now for it to happen again in North Carolina.

How can this be part of their plan? It works this way: Cintra makes projections of traveler use of future toll lanes in “good faith” based on “studies.” No one seems to question these “studies” up front since Cintra is such a large corporation and the contracts are complicated. And, all of the players involved, want the process to continue and the financing be made available.

So, Cintra will provide whatever data it takes which will support the loan approval. It could be all inflated “best case scenarios,” and a bit of a stretch, but as long as the government and lenders agree to the projections, then the loan is built around them.

If things turn sour, as they often have for these contracts, everyone can then say, “we did the best we could based on the data we were provided.”

Why is anyone willing to take this risk? Money. Since Cintra borrows the money as an LLC, they actually have little if any risk, plus they make hundreds of millions, potentially billions.

That’s why LLCs are formed, to make money but avoid risk. The bank is also not risking much, because either Cintra will pay the loan, or, since the government backs the loan, the government takes responsibility for the debt. Such is the case in North Carolina.

Otherwise, Cintra would not be able to borrow $300 million. Plus, the state of North Carolina has obligated itself to pay Cintra $75 million in toll subsidies, because it is already feared that toll revenues will not be sufficient. By doing so, the state acknowledges that the revenue projections are untrustworthy.

So to sum up, neither Cintra nor the lenders have as much to lose as taxpayers.

Taxpayers are financing the project through a complicated process and all of the profits go to Cintra and a few investors. Some might even make it back to the friendly supportive government officials by way of campaign donations, who bent over backwards to push the contract through.

Hmmm. One has to wonder why else would anyone support such an obviously malfunctioning contract with a company with a long history of corruption, bribery, defective work, misaimed financial projections and bankruptcies. Thats Cintra!

Why does the State of North Carolina back the loan or contract?

Why does the state do business with a company like Cintra? Why does the state bend over backwards at every juncture to make sure the deal happens? Why is every excuse possible made to accommodate each mishap and troubling information, such as the many other Cintra bankruptcies? Why does the state ignore the pleas to stop the contract by the vast majority of citizens and businesses and numerous elected officials? Why is the state putting more taxpayer money into this Cintra contract than what would be necessary to build new lanes directly themselves?

Why doesn’t Pat McCrory just put an end to this problem, now!

Nils Lucander is a creative director and writer who lives and works in Davidson, which means he doesn’t commute on I-77. Nevertheless, he donates his talents to the anti-toll movement, including His email address is: [email protected]


8 Responses to “Opinion: Bankruptcy just part of the plan”

  1. Great analysis Nils—thank you.

    Posted by John Blakely | March 7, 2016, 8:38 pm
  2. Yes, thanks Nils, for outlining the big picture and getting the word out!

    Posted by Kimberly Burnitt | March 7, 2016, 9:11 pm
  3. Spot on– as always Nils

    Posted by wcsykes | March 7, 2016, 10:00 pm
  4. The citizens of North Carolina are being defrauded.

    Posted by Sharon Hudson | March 8, 2016, 3:24 am
  5. I’ll just say it…Pat McCrory and Thom Tillus won’t cancel this contract because their elections were financed in part by Cintra and the money has already been spent. Because of this we suffer. And sadly they will probably be re-elected by those they have hurt the most.

    Posted by Pattie | April 14, 2016, 4:01 pm

    One important part is missing from this article concerning consequences for this type behavior. Courts can hold “all” these people responsible for this hybrid ponzi scheme.…/personal-liability-piercing…

    Posted by Tom Davis | April 14, 2016, 4:26 pm
  7. Is it too late for us to get out of the contract? It appears to be out and out fraud. Can McCrory and Tillis be sued?

    Posted by Fran Ferraro | April 14, 2016, 7:21 pm
  8. Fran, it is not too late, but with each passing day it becomes more expensive to do so. There are penalties involved with cancelling that are a reflection of (I believe) the present value of the project. The more work done, the higher the penalty for cancelling. It is, however, nowhere near the scare tactic number floated by McCrory and others.

    Posted by Christian Hine | April 16, 2016, 7:06 am

Post a Comment