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Project Profile: South Bay Expressway (formerly SR 125 South Toll Road)

South Bay Expressway (formerly SR 125 South Toll Road)

photo credit: Caltrans South Bay Expressway, L.P.


San Diego County, California

Project Sponsor / Borrower


South Bay Expressway L.P. - Original Borrower

San Diego Association of Governments - Current Borrower (see below)

Program Areas

P3Project FinanceTolling and PricingValue CaptureTIFIA


Toll Highway


The South Bay Expressway (SBX) toll road (the SBX Project) is a 9.2-mile, privately-developed southern extension of SR 125, extending from San Miguel Road in Bonita, CA near the Sweetwater Reservoir to SR 905 in Otay Mesa, near the International Border. The SBX Project connects the only commercial port of entry in San Diego to the regional freeway network. This project, made possible through an innovative public-private partnership, completes the missing link in San Diego's third north-south freeway corridor. The SBX Project connects Otay Mesa, the largest area of industrial-zoned land remaining in San Diego County, with eastern Chula Vista and points north and east, reducing commute times and providing convenient access to downtown San Diego, Sorrento Valley, Santee, I-8 and I-15, and Mexico.

The SBX Project was developed pursuant to California's AB 680 legislation passed in 1989. Under the original franchise agreement, the private developer raised capital for the Project and constructed the road in exchange for a 35-year toll concession. Caltrans owns the highway, but leases the road back to the franchisee. Currently, the San Diego Association of Governments (SANDAG) has the franchise, under an amended agreement executed when the toll road was sold to SANDAG in December 2011 (see discussion below for more information). Control will revert back to Caltrans in 2042.

In conjunction with the construction of the toll road, two local government-funded projects at the northern end of the toll road known as the "Gap and Connector" were built to link the SBX Project to the existing San Diego freeway network.

The SBX Project offers cash and credit card payment as well as electronic toll collection through the FasTrak system. Construction of the toll road and the "Gap and Connector" projects was performed under design-build contracts.


$658 million

Funding Sources

Construction Period Financing

  • Bank debt - $340 million (backed by toll revenues)
  • TIFIA loan - $140 million (backed by toll revenues)
  • Donated right of way - $48 million
  • Investor equity - $130 million
Project Delivery / Contract Method

35-year Build-transfer-operate franchise with the State of California that allows the franchisee to set market rate tolls

Private Partner

South Bay Expressway, L.P. (SBX LP), formerly owned by Macquarie 125 Holdings, Inc. and Macquarie Infrastructure Partners. (These entities were the original developer and equity holders, respectively. See below for current ownership.)

Project Advisors / Consultants

Nossaman, Guthner, Knox & Elliott, LLP - Special Counsel to SBX

Milbank, Tweed, Hadley & McCloy, LLC - Legal Counsel to SBX

Salomon Smith Barney - Financial Advisor to SBX

Parsons - Construction Manager

Orrick, Herrington & Sutcliffe LLP - Lenders' Legal Counsel

Wilbur Smith Associates - Borrower's Traffic Consultant

AECOM/Maunsell - Tolling Advisor to SBX

Louis Berger - Lenders' Traffic Advisor

ARUP - Lenders' Technical Advisor


  • TIFIA Financial Advisor - Montague DeRose and Associates, LLC/TransTech Management, Inc.
  • TIFIA Legal Counsel - Nixon Peabody LLP

Bank lenders (syndicated group of 10 banks); USDOT TIFIA

Duration / Status

Opened to traffic in November 2007

TIFIA Credit Assistance

Direct Loan - $140 million

The TIFIA loan is secured by a priority security interest in all project collateral, including, but not limited to: (a) all income, tolls, revenues, rates, fees, charges, rentals, or other receipts derived by or related to the operation or ownership of the project including all amounts from joint development or leasing of air space lease rights; (b) any revenues assigned to the Borrower and proceeds of the sale or other disposition of all or any part of the project; and (c) all income derived from permitted investments. The TIFIA loan is also secured by a mortgage on the Borrower's leasehold interest in the real estate underlying the toll road right of way.

Financial Status / Financial Performance

Financial close on May 22, 2003

TIFIA credit agreement signed on May 22, 2003

On March 22, 2010, the privately owned toll road operator and TIFIA borrower, SBX LP, applied for reorganization under Chapter 11 of the U.S. Bankruptcy Code. With accrued interest, the outstanding balance of the TIFIA loan at the time of the bankruptcy filing was $172 million and, pursuant to TIFIA statutory requirements, TIFIA's debt became on par with that of the Lenders. The senior lien of TIFIA and the Lenders was confirmed by the Court during the bankruptcy process.

The filing was primarily the result of the burden of claims by the contractor that built the SBX Project, particularly the ongoing litigation costs. The SBX Project's financial condition was also a factor as the financial prospects were being impacted by lower than anticipated revenues due to the economic downturn.

On December 30, 2010, SBX LP filed a Plan of Reorganization (Plan) with the Bankruptcy Court, pursuant to which SBX LP was converted to a Delaware limited liability company, South Bay Expressway, LLC (SBX LLC), and the debt of the Lenders and TIFIA was restructured. The Bankruptcy Court confirmed the Plan on April 14, 2011, which included the settlement of all litigation matters with the contractor, Caltrans, and certain other parties.

Under the Plan, TIFIA's secured claim was $99 million, of which approximately $93 million represented debt (the new loan amount) and $6 million was equity. TIFIA's unsecured claim was $73 million, or 42 percent of the $172 million outstanding balance. All future toll revenues were to be shared pro rata between TIFIA (32 percent) and the Lenders (68 percent). The Lenders and TIFIA held 100 percent of the restructured debt and owned all of the equity in the reorganized company. Although DOT wrote down a portion of the principal balance, TIFIA was scheduled to recapture more than 90 percent of the original loan by the final maturity date of 2042. The reorganized company, SBX LLC, emerged from bankruptcy on April 28, 2011, concurrent with the financial close of the restructured loans.

Soon after emergence, San Diego Association of Governments (SANDAG) approached TIFIA and the Lenders with respect to a possible purchase of the SBX Project by SANDAG. On July 22, 2011, SANDAG, the Lenders and TIFIA reached an agreement in principal for the purchase of the SBX Project for $344.5 million in cash and debt (excluding cash on hand and non-core assets). On December 21, 2011, SANDAG purchased the SBX Project from TIFIA and the Lenders, with TIFIA issuing a note to SANDAG for a restated loan in the amount of $94.1 million. In addition, as consideration for the sale of the project, TIFIA received a cash distribution of $15.4 million and holds a subordinated note from SANDAG in the amount of $1.4 million. The basis for allocations between the Lenders (68 percent) and TIFIA (32 percent) was the pro rata share of the outstanding debt as of the bankruptcy filing.

The TIFIA note has a senior lien on the SBX Project Revenues and is structured into three tranches that bear interest at the same rates as in the Plan, which rates are higher than the rate for TIFIA's original loan for the SBX Project. The DOT also has a separate subordinate note, which compensates TIFIA in part for its equity portion under the Plan. Fitch Ratings has assigned an investment grade rating to the TIFIA debt. Now that substantially all of the assets (i.e., the SBX Project) of SBX LLC have been sold to SANDAG, TIFIA and the Lenders are in the process of liquidating and winding down SBX LLC.

The ultimate recoveries of the TIFIA loan for this Project depend on ongoing performance of the Toll Road. However, the credit quality of the cash flow stream has been improved significantly through the sale of the Toll Road 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 (compared to the 4.46 percent rate in the original loan), the TIFIA program is positioned to realize 100 percent of the original loan balance.

  • $140 million TIFIA loan was the first-ever provided to a private toll road development and the first with bank debt and private equity.
  • The original TIFIA debt service repayment structure was sculpted with mandatory and scheduled components.
Related Links / Articles

Project Website


South Bay Expressway
Tel: (619) 710-4021

Samuel Johnson
Director of Operations
Tel: (619) 710-4021
1129 La Media San Diego, CA 92154

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