Fitch Ratings has recently announced that it has downgraded the Indiana Finance Authority's private activity bonds (PABs) issued on behalf of I-69 Development Partners for the I-69 Section 5 P3 project to BBB-. Fitch has also placed the bonds on Rating Watch Negative (potential downgrade).

I-69 Development Partners is a team led by Corsan-Corviam Construccion SA to design, build, finance, operate and maintain the 21 new miles of I-69 Section 5 from Bloomington to Martinsville. The project investment is estimated at US$325 million.

According to Fitch Ratings, the downgrade reflects the deteriorating credit quality of Isolux Corsan SA (Isolux), parent of the project contractor, Corsan-Corviam Construccion SA, whose rating was revised to B-/Rating Watch Negative on February 12, 2016. This followed an earlier downgrade of Isolux on December 7, 2015 to B/Rating Watch Negative.

Additionlly, the downgrade further reflects a projected eight month delay to substantial completion, initially expected in October 2016. The delay was disclosed in the most recent construction update published in March 2016.

Reasons for the construction delays primarily relate to obtaining necessary rail road permits as well as the updating and modification of 404 other permits required for works at multiple locations. They also reflect geotechnical issues faced by the project at two sites as a result of the discovery of unexpected karst features, for which Fitch understands the project company has requested a relief event. 

In Fitch's opinion the material delay in substantial completion implies a greater exposure to the credit quality of the construction guarantor. The Rating Watch Negative on the PABs reflects the Rating Watch Negative on the construction guarantor's ratings. Fitch believes, based on all information it has received, that the revised substantial completion date of June 28, 2017 is achievable given that all material permits have now been approved.

Fitch will closely monitor further progress on the project, as well as developments relating to the credit quality of Isolux.