The original owners of the Texas 130 tollway south of Mustang Ridge knew before the road opened that both its pavement and its finances were doomed, a lawsuit filed Thursday by the new owners alleges, yet concealed that information from its investors and paid almost $330 million to a company they had created to build the road.
The 41-mile road’s current owners — made up primarily of those who lent the Ferrovial S.A. of Spain and Zachry Construction Corp. of San Antonio about $1.22 billion to design and build Texas 130 and then took over the bankrupt road in 2017 — are asking a federal bankruptcy court in Austin to award them all money paid for construction between February 2011 and December 2012.
That current ownership group, who took over the road as it emerged from bankruptcy still owing much of what it had borrowed, includes the U.S. Department of Transportation, which had lent the project almost $500 million. The current owners estimate that repairing cracks and heaving pavement at multiple locations, both work that has already occurred and still to come, will cost $130 million.
The 14 defendants, all of them affiliates of either Ferrovial or Zachry, or both, includes Central Texas Highway Constructors, which according to the lawsuit was owned half and half by the two parent company. That company, known as CTHC in the lawsuit, had a contract for about $924 million to build four-lane tollway between Mustang Ridge and Seguin.
“From the outset of construction in 2009,” the lawsuit alleges, “CTHC performed abysmally under the (design and construction) contract. In both design and construction, it cut corners, failed to follow industry practice, failed to implement its own designs and, in the end, designed and constructed a (road) with significant defects from one end to the other.”
Beyond that, the plaintiffs allege, the consortium knew early on during construction that the road’s pavement was likely to fail soon after opening and that traffic and revenue estimates made during the project’s gestation were wildly optimistic. The lenders, the suits says, were purposely not told about those fundamental problems in violation of lending agreements.
“I hope that nobody starts asking questions,” the lawsuit says one representative of Cintra, a Ferrovial subsidiary, said during construction.
By continuing to pay its construction subsidiary, according to the lawsuit, Ferrovial and Zachry violated contractual language stipulating that “no payment shall be made for any improperly done (design and construction) work.”
Both companies Friday said the lawsuit has no merit.
“Cintra believes the allegations against it and its affiliated companies have no merit and intends to defend itself vigorously,” said Patrick Rhode, the Austin-based vice president for corporate affairs for Cintra’s United States arm. “We stand by our more than 50-year history of successfully delivering transportation solutions around the world.”
Tara Snowden, director of public and government affairs for Zachry Construction Corp., said that “of course we deny the allegations, and to the best of our knowledge there was no impropriety by Zachry Construction or its employees.”
Ferrovial and Zachry, operating at the SH 130 Concession Co., built the broad under a 50-year lease with the Texas Department of Transportation. The new owners are operating under the same lease, and pay TxDOT 4.65 percent of all toll revenue. The state agency, which owns the ground beneath the tollway, has no financial exposure on the project.