Highway Builders Discover Dead End for Debt

Heavy reliance on bank loans by local governments to finance a 3-year-old, nationwide highway construction boom is showing an uglier side as short-term liquidity risks emerge.

Money from commercial bank loans with one- to three-year maturities poured into highway and other infrastructure projects between late 2008 and 2010. But in recent months, government financing vehicles that sponsored the projects and planned to borrow more money – either to pay old debt, or finish incomplete roads – have been left in the lurch.