Fitch Rates NTTA's Revenue Bonds 'A'; Positive Outlook.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 25, 2003

The North Texas Tollway Authority's (NTTA or the authority) approximately $235 million revenue bonds, series 2003A and $135 million revenue refunding bonds, series 2003B are rated 'A' by Fitch Ratings. In addition, Fitch is confirming the underlying rating on outstanding $795.9 million revenue bonds. The series 2003 bonds are expected to price May 5 via a syndicate led by Citigroup. Both series of bonds are dated May 1, 2003. The series 2003A matures Jan. 1, 2021-38 and will provide funds for the completion of Segment IV for the President George Bush Turnpike, fund other system improvements, as well as the debt reserve and capitalized interest accounts. The series 2003B mature July 1, 2038 as a term bond, but also have a mandatory tender date of July 1, 2008, when they can be remarketed as fixed or variable rate debt. This series does not carry a credit facility. The series 2003B bonds will refund a portion of outstanding series 1995 for restructuring purposes. The Rating Outlook is Positive.

Traffic and revenues in recent years exceeded expectations from the 1998 forecast, and appear likely to continue so for the medium term. The maturing Dallas North Tollway (DNT) provides a higher revenue base for debt service in the near term. Strong revenue ramp-up on the President George Bush Turnpike (PGBT) provides increasing revenue diversity and a comfortable coverage of debt service thereafter. NTTA has a sizable revenue base and ample internal liquidity to weather revenue volatility from regional economic cycles, and is well poised for a new round of capital expansion. Management's proactive stance toward debt management and the system's moderate rate-making flexibility largely allay the concern of over-leveraging the system for new projects for this large and growing service area. As with other U.S. toll road authorities, there are potential political risks for the NTTA associated with future project selection. However, the authority has demonstrated strong and transparent financial management and capital budgeting policies, which lessen such pressures. Improvement in credit quality is possible, depending upon continued adherence to the authority's financial and capital planning model and the management of capital investments.

The key rating considerations of NTTA include its current and prospective financial flexibility, a dynamic service area, proactive management and never-ending capital needs. Like other sunbelt urban expressway authorities, traffic and revenues exceeded forecast in recent years, resulting in stronger than expected debt service coverage and invested reserves. During this period, Fitch upgraded the long-term debt ratings of several sunbelt urban expressway authorities, including the debt of NTTA to 'A' from 'A-' in June of 2001. While debt service coverage levels of the sunbelt urban expressway authorities are high for their current ratings, all are highly leveraged and are expected to add considerable new debt for capital expansion projects during the current decade. Upward rating mobility, therefore, is tied to the development and adherence of capital planning that takes into account the economic feasibility of future projects, future debt service requirements, toll rate flexibility, economic cycles of the service area, and an efficient allocation of capital with respect to invested assets and long-term liabilities. By these measures, NTTA is proactive, with a comprehensive but short lived financial and capital planning model that is innovative for the toll road sector.

Historically, financial performance has been favorable, with debt service coverage ranging from a low of 1.4 times (x) in 1993 to a high of 2.4x in 1999. Higher traffic levels on the DNT as well as the successful ramp-up of several segments of the PGBT have resulted in better than projected toll revenue collections. Audited 2002 financial results point to a 2.1x debt service coverage ratio; in 2001, fiscal 2002 net revenues were projected to provide 1.7x coverage. Liquidity position remains strong, with fiscal 2002 restricted and unrestricted cash and investments equaling over one-third of outstanding debt, including subordinate ISTEA loan obligations and then outstanding CP. Net working capital is also favorable, representing 65% of gross net income in 2002. Management's stated intention to maintain liquidity at high levels is a key rating factor given the existing amount of debt and the additional debt anticipated for approved projects and new expansion projects. In addition, NTTA's financial planning and disclosure are excellent for the toll road sector.

The success of the DNT and PGBT facilities is largely due to their strategic importance and location within the large Dallas-Fort Worth metropolitan area (or the metroplex). The NTTA's 2000 four-county service area population totals 4.6 million, a 27.8% increase over the 1990 census total. During the 1990s, Collin County was among the fastest growing counties in the US. The metroplex economy is broad and includes high technology, banking, healthcare, manufacturing, and warehousing and distribution. While the ongoing recession has contributed to the area's higher unemployment rates, the long-term economic outlook remains favorable given the extensive and diverse employment base, substantial and increasing population, and above wealth levels.

The location of the DNT and PGBT also bodes well for the NTTA, given the rapid pace of ongoing and planned development in the northern half of the metroplex. Sizable employment centers now exist throughout the metroplex, particularly north of downtown Dallas, the historical employment hub, altering traffic patterns. In addition, segment openings of the PGBT and the planned DNT extension continue to spawn new residential and commercial development, adding to the value of NTTA assets.

The NTTA has a seven-member governing board. One member is appointed by the governor and one by the commissioner's court of each of the four counties, with the remaining two members appointed, on a rotating basis, by the three counties containing a portion of the NTTA system. Its administrative staff includes an executive director, deputy executive director, director of finance, and project engineer. All except for the director of finance joined the authority in the intervening years after its creation in 1997. An important rating consideration is the professionalism of its administrative team, its commitment to financial planning and transparency, and its proactive use of traffic and engineering consultants.