DALLAS — Amid major expansions, Texas’ top two toll road authorities are preparing variable-rate refundings expected to total about $200 million.
The North Texas Tollway Authority’s $100 million of 2011A bonds will refund Series 2008J. The bonds are backed by a direct-pay letter of credit from Morgan Stanley Bank, earning ratings of A1 from Moody’s Investors Service and A-plus from Standard & Poor’s.
The NTTA bonds will initially be offered in the weekly mode, but may be converted to bear interest in the daily mode, commercial paper mode, adjustable long mode, fixed mode, or a flex private placement rate mode, according to analysts. The LOC will only enhance bonds while they bear interest in the daily or weekly rate mode. The bonds are also subject to mandatory tender upon any mode-conversion date and on the effective substitution date of the LOC.
In another deal expected to go to market next week, the Harris County Toll Road Authority will refund $100 million of put bonds issued last year. The 2011A bonds are expected to be issued either as window variable-rate demand bonds or as put bonds. The window VRDBs are dual put bonds supported by self-liquidity that can be tendered at any time. If market conditions are unfavorable, the authority will pursue a one- or two-year put bond, analysts said.
The HCTRA bonds are rated AA-minus by Fitch Ratings and are awaiting opinions from Standard & Poor’s and Moody’s.
Moody’s last month put Harris County’s general obligation bond rating of Aaa on watch list for a possible downgrade.
“The review for downgrade reflects the county’s narrowed financial position following a deficit in 2010 that is projected to have grown in 2011, exacerbated by a change in accounting treatment of mobility related funding that has further constrained financial flexibility,” analyst Robyn Rosenblatt wrote. The action does not impact the toll road revenue bonds. Moody’s expects to complete the review within 90 days.
The toll bond issues come as both authorities are working on major expansions of their systems. The HCTRA is in the process of widening the Sam Houston Tollway and the Hardy downtown connector as it replaces toll collection equipment and software under a $367 million capital improvement program.
The authority’s capital improvement plan was sharply reduced after the county notified the state it would not participate in three segments of a project known as the Grand Parkway in December 2010. The parkway is an outer loop around the Houston metro area that includes large sections of land awaiting development. So far, the HCTRA has built tollways only in areas experiencing heavy traffic and has avoided using federal funds to speed development.
The HCTRA’s traffic and toll revenues in fiscal 2011 were up 2.5% and 3.8%, respectively, which includes the Sam Houston Northeast segment that opened in February. In addition, the first three months of fiscal 2012 show positive traffic and revenue trends, up 4.2% and 4.7%, respectively, according to analysts.
The NTTA, meanwhile, has tripled its debt load as it undertakes new tollways in Dallas and Tarrant counties while completing the $3.5 billion Sam Rayburn Tollway north of Dallas.
