Fitch Affirms Cameron Co., Texas Int'l Toll Bridge Revs at 'A', Stable Outlook.

NEW YORK -- Fitch affirms the underlying 'A' rating on $11.9 million Cameron County, TX International Toll Bridge System revenue bonds, series 1997 and 1998, which are secured by net revenues of the Cameron County International Bridge System (the system). The Rating Outlook on the bonds is Stable.

The 'A' rating reflects the system's favorable historical operating performance, competitive toll rates, moderate debt position, and growing service area. The rating also incorporates the system's susceptibility to economic cycles on both sides of the U.S./Mexican border, its history of annual traffic volatility, the potential for future system expansion, and the sizable annual transfers to the Cameron County (the county) general fund and partner cities.

The system comprises three bridges located in the greater Brownsville-Harlingen area, the Gateway Bridge that was acquired in 1960, the Free Trade Bridge that opened in 1992, and the Veteran's Bridge that opened in 1999. Systemwide vehicular transactions increased at a 5% average annual rate since 1992 to reach 5.5 million transactions in fiscal 2005, a figure comparable to fiscal 2004. Traffic increased 40% with the opening of the Los Tomates Bridge in fiscal 2000 but declined a combined 5% from 2001-2004 due to economic downturns in the U.S. and Mexico. The annual volatility is mitigated by the region's strong population growth and stable long-term economic prospects, which provide a consistent base of traffic.

Fiscal 2005 net toll revenues of $10.8 million were sufficient to provide a high 4.41 times (x) coverage of debt service, with coverage levels at or above 3.40x since fiscal 2001. Fitch estimates that current traffic and system toll rates (which are adjusted periodically to match the rates for similar international bridge crossings) would be sufficient to provide debt service coverage well above the rate covenant without any significant growth in system traffic. The system supports subordinated transfers to the Cameron County general fund, which equaled approximately $8 million in fiscal 2005. Though these transfers may prevent liquidity from accumulating within the system, they pose little risk to the system as they are incorporated into the toll rate base and are subordinated to payment of operating expenses, debt service, and required fund deposits. The system's liquidity position is adequate, with cash and investments representing 25% of total operating revenues in fiscal 2004.

While Cameron County is the sole owner of the U.S. half of all three bridges, other local municipalities participated in the two newer bridges by sharing in initial operating deficits with the benefit of also sharing in any surpluses as specified in the interlocal agreements. After six years of operations, the Free Trade Bridge generated a surplus beginning in fiscal 1999. The interlocal agreement between the cities of San Benito and Harlingen and the county calls for surpluses, after the payment of operations and maintenance as well as 1.4x debt service on the bridge, to be split 25% each for the cities and 50% for the county. The Veterans Bridge, which shares surpluses evenly between the City of Brownsville and the county, has posted surpluses since its inception in fiscal 1999. The county distributed $2.9 million to partner cities in fiscal 2004.

The county is currently studying the feasibility of constructing a fourth bridge to handle rail traffic as part of a federally sponsored program to relocate rail traffic away from the downtown areas of Brownsville, TX and Matamoros, Mexico. While the plan is in early planning and designing stages, the cost is estimated to be $20 million-$30 million and would likely be funded with system revenue bonds. Fitch estimates that the system possesses adequate financial flexibility to fund construction of a fourth bridge at current rating levels. The February 2005 formation of the Cameron County Regional Mobility Authority (CCRMA) is not expected to impact the system in the near- to medium-term. The CCRMA is distinct entity, which may partner with the Texas Department of Transportation to advance the construction of roadway projects throughout the county. The CCRMA has several powers, including tolling portions of state roads, or assuming ownership of nonstate roads such as the bridge system. System bondholders would be protected in this unlikely scenario, since it is expected that the state would assume responsibility of the bridge system debt.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria, and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance, and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.