DALLAS — After issuing $1.3 billion of revenue bonds under its new special projects lien, the North Texas Tollway Authority has maintained its critical A-level ratings on its first-tier main system revenue bonds.
The affirmed ratings of A2 from Moody’s Investors Service and A-minus from Standard & Poor’s were issued in advance of $266.3 million of first-tier refunding bonds backed by toll-system revenues. The deal is expected to price through negotiation next week with Siebert, Brandford, Shank & Co. as senior manager.
While S&P maintained its stable outlook on the upcoming issue, Moody’s changed its negative outlook to stable. Moody’s analyst Laura Barrientos cited growing toll revenues in the improved outlook.
“The stable outlook is also based on our expectation that the NTTA will be able to maintain its target debt-service coverage ratios with moderate traffic growth over the medium to long term,” Barrientos wrote in her rating report.
While those ratings apply to NTTA’s $6.1 billion of first-tier debt, the authority also carries $1.1 billion of second-tier revenue bonds with lower ratings of BBB-plus from S&P and Baa3 from Moody’s.
Analysts said the NTTA’s board governance has been in flux, with former Fort Worth Mayor Kenneth Barr replacing outgoing chair Victor Vandergriff, who remains on the board. Vandergriff had been touted as a candidate for the state Senate but has decided not to seek the office.
Unidentified current and former board members are under investigation for business practices by the Federal Bureau of Investigation. The harshest criticism of the board has been its reliance on “legacy contractors” who have worked for the board for years without competition.
Proceeds of the upcoming sale will refund Series 1997A and a portion of Series 1998 bonds for savings, and Series 2008E-2 put bonds with long-term fixed-rate bonds. A portion of Series 2003A could also be refunded.
While the special projects to be backed by their own separate revenues are either just getting underway or in the planning stages, the NTTA’s primary system of toll roads is nearing completion.
“Construction and ramp-up risk is diminishing, given that all current projects will be completed and in operation by January 2012,” Barrientos noted.
The most costly and recent of the main system projects is the $3.5 billion Sam Rayburn Tollway that arcs across Dallas’ northern suburbs, linking with the North Dallas Tollway and the President George Bush Turnpike. Financing for the Rayburn Tollway in the financially calamitous year 2008 was premised on NTTA maintaining an “A-category” rating on its senior debt.
The Bush Turnpike will connect to the current Western Extension, which is funded by the special projects bonds.
The special projects bonds are backed by a toll equity loan agreement from the Texas Department of Transportation in the event that revenues fall short of debt service. However, those projects cover highly traveled routes and are expected to easily pay their own way, according to studies conducted by outside authorities.
The NTTA’s $641 million special projects issue last week for the Chisholm Trail Parkway in Tarrant and Johnson counties was oversubscribed and beat interest-rate expectations, according to chief financial officer Janice Davis.
The sale included $73.7 million of taxable bonds with yields ranging from 3.269% to 3.869% and $566.9 million of tax-exempt bonds with yields that ranged from 2.59% on the 2019 maturities to 4.24% on the 2032 maturities.
“It was a good day to be in the bond market,” Davis said. “The uncertainty in the stock market, the strength of the Chisholm Trail Parkway project, and the NTTA’s strong credit combined for a successful transaction.”
NTTA issued its first special projects bonds in April.
