Fitch Comments on Louisiana 1 Toll Road Higher-Than-Expected Bids.

NEW YORK -- The announcement by the State of Louisiana's Department of Transportation and Development (DOTD, or the department) that its LA1 toll road project bids have come in about $100 million (or 65%) higher than anticipated at the time of the financing is a matter of concern. It is possible that the department will reject the contractors' proposed cost, alter the scope, and/or rebid the project. Fitch notes that project completion risk under the terms of the project financing lies primarily with the state, given its commitments through various state agencies, subject to legislative appropriation, to fund cost overruns and provide a debt service reserve fill-up.

Fitch rates the Louisiana Transportation Authority's (LTA) LA1 project senior lien toll revenue bonds 'A-' and subordinate lien bond anticipation notes (BANs) 'A+', both with a Stable Outlook. The substantially higher-than-expected construction bids and potential delays pose a major challenge to the state. The department is required, subject to legislative appropriation, to fund construction cost overruns. The extended senior lien capitalized interest period through Dec. 1, 2009 provides a margin of protection. The state's commitment, subject to legislative appropriation, to refill draws on the debt service reserve fund further protects senior lien bondholders from delays and lower-than-projected toll revenue. Fitch shall monitor developments and provide additional commentary as necessary.

Phase I of the LA1 project encompasses a tolled, high-level span two-lane bridge crossing Bayou LaFourche in Leeville, LA and a connecting elevated two-lane road extending south to LA 3090 near Port Fourchon. The LTA is a public corporation, created by the Louisiana Legislature and placed within the DOTD. It is responsible for developing, constructing, improving, expanding, and maintaining an intermodal transportation system within the state. The DOTD, which is serving as the LTA's agent for constructing and operating the LA1 project, is body corporate responsible for developing and implementing programs to ensure adequate, safe, and efficient statewide transportation network.

Fitch's rating definitions are available on the agency's public web site, www.fitchratings.com. Published ratings, criteria and methodologies and relevant policies and procedures are also available from this site, at all times. This document will remain on the public site for seven days.