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Fitch Rates $120MM Maine Turnpike Authority Rev Bonds 'AA-'; Outlook Stable
Posted February 3, 2012
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NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA-' rating to approximately $70 million series 2012 A Maine Turnpike Authority (the authority or the MTA) turnpike revenue bonds and $50 million series 2012B turnpike revenue refunding bonds. The bonds are expected to price on or after Feb. 28, 2012. Fitch also affirms the 'AA-' rating on approximately $399 million of turnpike revenue bonds outstanding and the 'A-' rating on the authority's $15 million special obligation bonds outstanding.
The Rating Outlook is Stable.
Key Rating Drivers
--Proven Asset: Mature service area supports a stable leisure-based traffic and revenue base;
--Demonstrated Rate-Making Ability: Competitive toll rates by national standards and continued economic ratemaking ability and willingness to maximize revenue through periodic toll rate increases has generated solid debt service coverage levels (DSCRs) of at least 2.0 times (x) since fiscal 2005;
--Low Leverage and Liquidity Levels: Overall financial metrics remain healthy although the authority retains little excess cash after meeting all reserve deposit amounts and obligations and has limited ability to build unencumbered liquid reserves. The authority retains a moderate debt burden at approximately 4.8x net debt-to-cash flow available for debt service;
--Manageable Capital Program: Management maintains the ability to fund a significant portion of capital needs on a pay-as-you-go basis and its six-year capital program of approximately $497 million is manageable.
What Could Trigger a Rating Action
--Management's continued ability to pace additional leverage for capital with periodic toll increases and produce debt service coverage levels above the 2.0x.
Security:
The turnpike revenue bonds are primarily secured by the net toll revenues of the MTA after the payment of operating expenses. The special obligation bonds are secured by a pledge of all special obligation revenues, which are defined as those monies which are transferred by the authority out of the Department of Transportation Provision account in the general reserve fund and on deposit with the trustee pursuant to the special obligation resolution for the payment of debt service. Per the resolution, the authority has covenanted to transfer amounts sufficient to pay debt service; however, such transfers are statutorily limited by the enabling act to $4,700,000.
Transaction Summary:
The MTA plans to issue approximately $70 million in series 2012A turnpike revenue bonds and approximately $50 million turnpike revenue refunding bonds to refund a portion of the outstanding series 2000 bonds. The Series 2012 B issuance is for interest rate savings currently estimated at approximately $5 million through the life of the bonds. The 2028 maturity of the refunding bonds is the same as the bonds being refunded.
Traffic levels have experienced recent softening in 2011, reflective of the authority's mature traffic base as well as the sluggish economy. Traffic levels fell by approximately .88% in 2011 when compared to 2010 and are expected to be flat in 2012. However, the authority in 2011 was only approximately 4.6% off of its peak transactions level from 2007. The authority's split between passenger vehicles and commercial vehicles continues to be favorable, with passenger vehicles contributing approximately 65% of the total revenue base and commercial vehicles contributing approximately 32%.
The authority continues to generate solid financial metrics, recording over 2.0x debt service coverage since 2005. For 2011, senior lien debt service coverage is expected to be 2.25x, down from 2.67x reported in 2010, which captures the slight increase in annual debt service from approximately $26 million to $31 million. On an all-in-basis, including the authority's special obligation lien and deposits to a reserve maintenance fund, debt service coverage is estimated to be 1.24x in 2011 and has traditionally been at 1.10x or above. In 2012, the authority expects coverage to be at or near 2.54x, which is in-line with historical results. Going forward, coverage levels from 2013 through 2016 are expected to remain solid at over 2.30x, even with factoring in approximately $65 million in additional debt in 2014. The estimated healthy coverage levels reflect the authority's planned approximate 28% toll adjustment in February 2013, which is similar to the average toll increase implemented in 2009 of approximately 25%.
Over time, Fitch believes periodic toll increases will allow for the authority to continue to produce healthy financial metrics and operate above sum sufficiency. Over the near to medium term, Fitch expects gradual traffic recovery and debt service coverage to remain near or above 2.0x and 1.0x times on an all-in-basis.
The 2012-2018 capital improvement plan (CIP) is estimated at $497 million and focuses on bridge replacement and improvements, interchange renovations, and the replacement of the York mainline plaza. Funding sources for the CIP are derived from surplus revenues and debt issuances. The authority projects that the CIP will be funded 50% by debt.
In the response set forth by the Office of Program Evaluation and Government Accountability (OPEGA), which was focused on conducting an audit on the authority's operations and management, the Enabling Act was amended in June 2011 to eliminate the operating surplus transfer from MTA to Maine Department of Transportation (MDOT). Under the new amendment, the authority will allocate 5% of its operating revenues (based on a three-year rolling average) to department projects that are jointly determined by the MTA and MDOT. While at this time it is generally credit neutral given the authority's financial flexibility, to the extent that there are additional funding requirements that pressure the authority financial profile in the future, it may be a heightened credit risk.
The Maine Turnpike Authority is a body corporate and politic, empowered under its enabling act to construct, maintain, reconstruct and operate the turnpike. The Maine Turnpike extends 109 miles from a point in Kittery, ME in the south to a point in Augusta, ME in the northeast.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--Rating Criteria for Infrastructure and Project Finance, Aug. 16, 2011;
--Rating Criteria for Toll Roads, Bridges, and Tunnels, Aug. 5, 2011.
Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/report...
Rating Criteria for Toll Roads, Bridges, and Tunnels
http://www.fitchratings.com/creditdesk/report...
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