DALLAS - A year after issuing a record $5.3 billion of debt, the North Texas Tollway Authority is preparing a $343 million bond package that will tie up loose ends from its flurry of financing in 2008.
The tax-exempt Series 2009C and Series 2009D senior-lien bonds are likely to be issued by the end of this month or early November, according to an NTTA spokeswoman.
The Series C issue at $165 million will take out put bonds issued last year that come due Jan. 1. Part of the $178 million Series D will also be used for refunding the put bonds. Series D will be issued as variable-rate demand bonds with a letter of credit from JPMorgan Chase Bank.
"We are looking to close these bond issues on or about Nov. 5," said NTTA spokeswoman Susan Slupecki.
The 2009D bonds will be hedged by outstanding swaps that had been associated with Series 2005C bonds. The $178 million of 2005C bonds were partially refunded and remarketed through JPMorgan in August.
The NTTA still has two interest-rate swaps outstanding. Under a 2004 swap for $84 million, it pays a fixed rate of 3.673% and receives a floating rate of 67% of the London Interbank Offered Rate. A 2005 swap for $94 million has the it paying a fixed rate of 3.533% for a floating rate of 67% of Libor. According to Moody's Investors Service, the mark-to-market of the swaps is a negative $19.9 million.
With the August remarketing, Standard & Poor's last week withdrew its underlying rating on the Series 2005C bonds to reflect that they are no longer insured by Financial Guaranty Insurance Co. Analysts also withdrew the bank bond rating they had on the bonds before their conversion to fixed rate.
On the upcoming deal, Standard & Poor's maintains its A-minus rating on the first-tier revenue bonds and its BBB-plus on outstanding second-tier debt. The outlook is stable.
"In our view, the A-minus rating on the authority's first-tier bonds reflects a highly leveraged system of toll facilities that will have an increased reliance on higher traffic and revenue growth levels to support adequate senior- and subordinate-lien projected debt service coverage under moderate downside stress scenarios," Standard & Poor's credit analyst Joseph Pezzimenti wrote in last week's report.
While Moody's affirmed its A2 first-tier rating and A3 second tier, analysts Maria Matesanz and Baye B. Larsen provided a negative outlook.
"The negative rating outlook is based on uncertainties resulting from weaker than projected traffic growth due to the economic recession, higher costs of debt service, as well as uncertainty regarding the pace of economic recovery and resumption of traffic growth in the region and interest rate risks associated with remarketing $1 billion of put bonds," they wrote.
With several new toll projects in progress and more than $7 billion of existing debt, the NTTA is treading a fine line in a recession, Pezzimenti indicated.
"The size of the system's debt constrains the rating, in our view," he wrote. "Any significant additional parity senior-lien debt beyond what is already planned could result in a downgrade, depending on the structure of the debt issuance and the expected associated revenues."
The NTTA has premised its financing plans on maintaining an A-category rating on its senior debt. It dropped Fitch Ratings in 2007 after analysts there lowered the first-tier rating to BBB-plus.
The authority's largest project, the $3.5 billion State Highway 121, also known as the Sam Rayburn Tollway, prompted last year's record issuance. About $68 million of this year's issues will go toward construction of the project.
In a new method for financing toll projects, the NTTA had to come up with the tollway's long-term value of $3.5 billion in 2007, even though the cost of construction is now estimated at less than $700 million. The bidding system was set up for private developers, such a consortium including Cintra and JPMorgan that initially won the project.
Cintra, which had been awarded the SH 121 project before state officials decided to rebid it to the NTTA, had pledged only $2.1 billion in up-front payments. The developer later sweetened that offer in competition with authority.
In order to outbid Cintra, the NTTA raised the cost of the project, pledging a full up-front payment when the economy was strong but has since had to raise the money in the midst of a recession.
As of June 1, the authority had spent about $226 million on the Sam Rayburn Tollway and had about $63 million on hand for further construction, according to an official statement. About $343 million of 2009 bonds will be used for the SRT project's construction, according to the statement.
The tollway will travel 25.9 miles through Collin, Dallas and Denton counties on completion in January 2012. The new highway is designed to carry traffic to and from the affluent suburbs northeast of Dallas toward Dallas-Fort Worth International Airport with connections to the NTTA's other tollways.
The SRT will intersect with the authority's flagship Dallas North Tollway several miles north of another NTTA project, the President George Bush Turnpike, named for President George H.W. Bush. The turnpike is designed to eventually loop around the Dallas metro area and is heading toward the halfway mark.
Another major project underway is State Highway 161 west of Dallas that will form part of the loop, heading south toward Grand Prairie. The $1.1 billion project is to be financed independently of the NTTA system, with the Texas Department of Transportation serving as a financial backer.
The 11.5-mile SH 161 tollway is being built in four phases with completion expected in September 2012. The NTTA is responsible for Phase 3 of the project after TxDOT completed Phase 2. To acquire the project, the authority had to pay department $458 million and agree to build Phase 4.
Currently, the NTTA holds only a project agreement with TxDOT to build SH 161 and can back out if the financing poses a risk to its credit rating or for other reasons. To continue with the project, the authority must make its acquisition payment by Feb. 28.
To build the new tollway without impairing NTTA's credit, TxDOT is pledging a $4.1 billion toll-equity loan to cover all costs of the project, including maintenance and operation over 52 years. In the 53d year, the department and the authority will share equally all toll revenues on SH 161, minus operating expenses.
The TxDOT toll equity loan would include a SH 161 trustee that would manage debt service. The NTTA would be responsible for covering any shortfalls in the debt service, which are expected to be about $300 million at the beginning of the deal. According to an official statement, the agency would cover that through bond issues.
"The authority intends to develop SH 161 only after it obtains and reviews an acceptable investment-grade traffic and revenue study, other final engineering and financing reports, an analysis of the impact on the NTTA System, and a determination by rating agencies that a commitment to undertake SH 161 will not adversely affect ratings on outstanding bonds or bonds to be issued under the Amended and Restated Trust Agreement," according to the agency's official statement.
