Fitch Affirms San Joaquin Hills Transp Corridor Agency (California) $1.97B Revs at 'BB'.
--$1.75 billion insured and uninsured toll road refunding revenue bonds, series 1997A;
--$226 million senior lien toll road revenue bonds, series 1993.
The Rating Outlook is Stable. A portion of the series 1997A bonds is rated 'AAA' based on a guarantee of scheduled debt service payments under an insurance policy with MBIA Insurance Corporation (insurer financial strength rated 'AAA' by Fitch). The bonds were originally underwritten by Citigroup Global Markets Inc. The bonds are secured by a net pledge of toll revenue collected at the mainline and ramp toll plazas and a portion of development impact fees assessed in the corridor.
The 'BB' rating reflects the strength of the SJHTCA's service area, management's demonstrated willingness to raise rates and act in the interest of bondholders, more economic rate-making flexibility than previously anticipated, slightly improved financial flexibility, and the project's role as a congestion reliever. The rating also incorporates the future financial challenges faced by the SJHTCA which are evidenced by the 64% increase in debt service obligations from fiscal year 2006-2012 and the nearly 100% increase by 2018. In addition, the SJHTCA will need to remain at its revenue maximization point for the foreseeable future to prevent a default, thus limiting its ability to deal with the loss of traffic from the construction of Foothill/South or short-to medium term disruptions from economic cycles between now and the final maturity of the debt in 2036.
SJHTCA's experience with implementing consistent toll increases supports Fitch's view that such facilities have growing strength over time. In Fitch's base case scenario which assumes annual rate increases at or above inflation, but below levels implemented by the SJHTCA board over the past five years, traffic could be expected to continue to grow moderately over time and may very well provide the SJHTCA with enough revenue to prevent a default. Even under Fitch's stress case scenario which assumes much lower traffic and revenue growth, a payment default would be forestalled to 2025-2030, with liquidity draws beginning in 2012. Fitch does assume the receipt of $120 million in mitigation payments for the impact of the construction of Foothill/South, which will be made by the SHJTCA's sister agency the Foothill/Eastern Transportation Corridor Agency (F/ETCA) pursuant to a mitigation payment and loan agreement entered into by the two agencies in November 2005. Importantly, the base and stress scenarios do not assume the availability of loan proceeds from the F/ETCA, as Fitch believes that the high likelihood for construction increases on Foothill/South may limit the availability of surplus cash for the SJHTCA.
Traffic on the facility was up 0.6% and 3.5% in fiscal years 2005 and 2006, respectively. While the growth rate is low, it was achieved despite an 18% increase in the average toll between fiscal 2004 and fiscal 2006. Traffic on the facility has grown at an average annual growth rate (AAGR) of about 12% between fiscal years 1997-2006 and reflects eight toll increases. Revenue was up 12.9% and 8.3% in fiscal years 2005 and 2006, respectively, and has increased at an AAGR of 19.2% between fiscal years 1997-2006. Excluding ramp-up in 1997-2000, revenue has grown at an AAGR of 9.8% between 2000 and 2006. Despite the substantial and frequent toll increases - the average toll has increased over 200% since the road opened - traffic has continued its slow growth every year, with fiscal 2001 being the only year in which traffic did not grow. In July of 2006, the mainline peak hour toll was increased by 14.3% ($0.50) and the off-peak mainline toll was increased by 8.3% ($0.25). Thus far traffic appears to be running at between 0-2% above fiscal 2006, with revenue up between 8-9%.
Debt service coverage for fiscal 2006 - including the use of approximately $1 million from the rate stabilization fund and the $12 million available under the Federal letter of Credit - was 1.41 times (x). Coverage in fiscal 2005 was 1.42x assuming $2 million in the rate stabilization fund. Structured liquidity consists of the Toll Rate Stabilization Fund which had $2 million, the Debt Service Reserve Fund which had $133.5 million and Occupancy Fund which had $15 million in cash and $10 million in the form of a surety, all as of June 30, 2006.
The San Joaquin Hills toll road is one of two projects managed by the Transportation Corridor Agencies (TCA) of Orange County, California. While toll revenues are the primary source of income on the San Joaquin Hills toll road, net development impact fees are also pledged to the bonds. The TCA also manages the Foothill/Eastern toll roads. Fitch rates the Foothill/Eastern project bonds 'BBB.'
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|Date:||Nov 14, 2006|
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