DALLAS — With its credit rating at the lowest rung of investment grade, Colorado’s E-470 Public Highway Authority has received a negative outlook from Fitch Ratings due to falling toll traffic.
“The negative outlook reflects the last two years of traffic declines and Fitch’s expectation of likely modest growth in traffic and toll revenues in the near to medium term,” analysts noted in affirming the authority’s BBB-minus rating.
The action affects $1.37 billion of outstanding revenue bonds and comes in advance of plans to refinance put bonds in the next 18 months. Some of the bonds are insured.
Standard & Poor’s also maintains a BBB-minus on the senior-lien debt but has not changed its stable outlook. Moody’s Investors Service also maintains a stable outlook on its Baa2 rating.
The authority operates and maintains the 47-mile eastern section of a tollway around metropolitan Denver. To the south, E-470 connects with the original tax-financed section in the south called Colorado 470 at the intersection of Interstate 25. To the north, E-470 joins Northwest Parkway at its junction with I-25.
The Northwest Parkway Public Highway Authority, the developers and operators of the tollway, signed a $603 million, 99-year lease concession agreement with Portugal-based toll operator Brisa and its Brazil partner CCR in 2007. The agreement defeased the authority’s long-term debt that had reached default ratings.
Fitch analysts take a more benign view of E-470, which sweeps across the eastern suburbs of Denver, primarily Aurora, en route to Denver International Airport.
“The BBB-minus rating reflects the established and relatively stable traffic demand along E-470 and the authority’s solid historical financial performance, continued strong liquidity, and track record of prudent financial management,” analysts wrote.
However, they also noted the impact of the weak economy on toll revenue. Revenues are likely to fall below historical levels of 1.39 times debt service, which could trigger a rate covenant violation, they wrote.
“The recent slowing of traffic growth does present additional concerns and will likely require toll increases beyond those in the plan of finance to keep pace with the escalating debt-service requirements,” the report said.
The authority’s most recent toll hike came in 2009, resulting in a 6.5% boost in toll revenue of $92.4 million. However, the toll increase and weakening economic conditions reduced traffic 7.7% in 2009 to 48.1 million transactions. In 2008, traffic declined 3.7% to 52.1 million due to the declining economic conditions and some weather problems.
“The moderate yield from the recent toll rate increase may be signaling that the asset has more limited rate-making ability,” Fitch said.
The E-470 authority was created as a subdivision of Colorado in 1988 and includes Adams,
Arapahoe, and Douglas counties as members, along with the cities of Aurora, Brighton, Thornton, Commerce City, and Parker.
