Fitch Downgrades Louisiana Transportation Auth Rev Bonds to 'BBB'; BANs to 'A'.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has downgraded and removed from Rating Watch Negative the following bonds for the Louisiana Transportation Authority (LTA LTA Land Transport Authority LTA Land Trust Alliance LTA Lawn Tennis Association LTA Lost Time Accident LTA Lighter-Than-Air LTA Lieutenant (Singapore military) LTA Lipoteichoic Acid LTA Lymphotoxin-Alpha or the authority): --$78.4 million LA 1 project senior lien senior lien n. the first security interest (lien or claim) placed upon property at a time before other liens, which are called "junior" liens. (See: mortgage, deed of trust, lien, UCC-1) toll revenue bonds Toll Revenue Bond A type of municipal bond used to build a public project such as a bridge, tunnel or expressway. The bond is repaid with revenues from tolls paid by users of the public project in question. , series 2005A, to 'BBB' from 'BBB+'. --$16.3 million LA 1 project senior lien toll revenue capital appreciation bonds, series 2005B, to 'BBB' from 'BBB+'. --$66 million LA 1 project subordinate lien toll revenue bond anticipation notes (BANs), series 2005, to 'A' from 'A+'. The senior lien bonds are insured by Ambac Assurance Corporation Ambac Assurance Corporation A subsidiary of publicly traded Ambac Financial Group that provides financial guarantees for municipal borrowers and for asset-backed and structured issues. (insurer financial strength rated 'AAA' by Fitch). The Rating Outlook on the senior lien bonds and subordinate lien BANs is Negative. Fitch's downgrade and Negative Outlook on the senior lien bonds and subordinate lien BANs reflect increasing project construction cost and on-going implementation pressures related to the construction of the LA 1 Phase I project. While the State of Louisiana's commitment, subject to annual appropriation, to cover construction cost overruns and refill refill noun A second allotment of a prescription agent obtained from a pharmacy, which is allowed by the original prescription verb Pharmacology To obtain more of a particular drug, after the initially prescribed amount of the agent has been used or draws on the senior lien debt service reserve fund continues to provide significant credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing , the ratings and Negative Outlook also consider the state's increasing obligations to the project within an uncertain economic and financial recovery environment. Fitch rates the state of Louisiana's general obligation bonds 'A' with a Negative Outlook, and its gasoline and fuels tax revenue bonds 'A+' with a Negative Outlook. The economic strength and monopoly position of the project, once it is completed, the importance of commercial activity at Port Fourchon to the economic health of the state, and the concentration of traffic demand that is largely dependent upon Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east oil and gas activity are also reflected in Fitch's 'BBB' rating on the senior lien bonds. Hurricane related damage at Port Fourchon is not expected to materially impact traffic demand. At the same time, Port Fourchon is benefiting from the consolidation of some functions from other damaged ports at its facilities. The 'A' rating by Fitch on the subordinate lien BANs further reflects the expectation that the LTA and the Department of Transportation and Development (DOTD DOTD Department of Transportation and Development (Louisiana) DOTD Dawn of the Dead (movie) DOTD Day of the Dead (movie) DOTD Deal of the Day or the department), serving as the authority's agent for the project will continue to address the project's cost and schedule pressures and meet the requirements of a secured loan agreement between the authority and the U.S. Department of Transportation (USDOT USDOT United States Department of Transportation ). Disbursements under a Transportation Infrastructure Finance and Innovation Act (TIFIA TIFIA Transportation Infrastructure Finance and Innovation Act ) loan are expected to take out the BANs on or before Sept 1, 2009. While the subordinate lien BAN maturity date is prior to the revised Dec. 1, 2009 scheduled implementation of toll collection, Fitch expects the LTA to take out the subordinate lien BANs at or prior to their maturity. Flexibility built into the secured loan agreement to amend the project's completion date in order to defer a development default and the expectation that the LTA and USDOT will continue to work cooperatively remain mitigating factors. Nevertheless, disbursements under the TIFIA loan are dependent upon the LTA's ability to perform, which is pressured and may be further pressured if additional cost increases and/or schedule delays materialize. Prior to hurricanes Katrina and Rita, the LTA and DOTD were contending with construction cost bids that were $100 million or 65% higher than expected. To manage cost pressures, DOTD divided the project into three phases, revised some project features, extended the period of construction and re-opened the bidding process. However, given significant Gulf Coast area reconstruction activity, bids for the bridge structure and connecting approaches have come in at $161.6 million or 17% higher than the revised November 2005 estimates. DOTD has accepted these bids and is proceeding with construction. The project may face additional cost pressures if the bid scheduled this fall for the elevated roadway connecting the bridge with Port Fourchon comes in still higher than DOTD's estimate. A key consideration to Fitch's rating on the senior lien bonds and subordinate lien BANs continues to be the department's commitment, subject to annual appropriation, to fund construction cost overruns. DOTD expects to fund about $90 million in additional project resource needs from yet to be committed transportation and non-transportation federal grant programs, reflecting the pressure facing the department. In Fitch's opinion, DOTD also retains the flexibility to delay or defer the elevated roadway's construction without materially impacting the project's expected toll revenue generation. Under such a scenario; however, this may introduce some level of political risk given a partial or delayed completion of the Phase I project and require some of the terms of the TIFIA secured loan agreement to be renegotiated with USDOT. While the expected Dec. 1, 2009 implementation of toll collection has not changed from the revised November 2005 schedule, it remains the last day of capitalized interest Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. on the senior lien bonds and 15 months later than initially expected when the bonds were sold in May 2005. Given that the LTA is using all of the construction schedule risk mitigation provided by the capitalized interest period and will lose more than a year of toll revenues, any additional project delays would likely result in a draw on the senior lien debt service reserve fund that would be replenished by the state, subject to appropriation. Phase I of the LA 1 project encompasses a tolled, high-level span two-lane bridge crossing Bayou LaFourche Bayou Lafourche is a bayou in southeastern Louisiana, United States, that flows into the Gulf of Mexico. The first settlements of Acadians in southern Louisiana were near Bayou Lafourche and Bayou des Ecores which led to a close association of the bayou with Cajun culture. 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 is a corporate body responsible for developing and implementing programs to ensure an adequate, safe, and efficient statewide transportation network. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. 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. 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