New Jersey and New Hampshire Agencies Ready Turnpike Sales

In the week’s largest municipal bond sale, the New Jersey Turnpike Authority is expected to bring $810 million of Turnpike revenue refunding bonds to market on Thursday.

The bonds will have maturities from 2019 through 2030 and will be subject to early redemption.

Citi is lead underwriter and Wolff & Samson PC is bond counsel.

The authority owns and operates the 152-mile New Jersey Turnpike, the state’s primary commercial north-south road, and the 173-mile Garden State Parkway, which serves large recreational areas on the Atlantic shore.

Revenues from tolls, fees, rents, charges and other income derived from operating the Turnpike will secure the bonds.

Moody’s Investors Service cited in its rating rationale the importance of the Turnpike and Parkway to transportation in the region.

“The A3 rating and stable outlook reflect inelastic demand for the authority’s toll roads despite large rate increases and the economic recession as well as the essential inter- and intrastate service they provide,” analysts said in a report.

On Dec. 2, 2008, the authority implemented its first of two approved toll increases, with the second increase taking effect on Jan. 1, 2012. Tolls for a peak-hour full-length trip on the Turnpike and Parkway rose 53% and 50%, respectively.

Moody’s cites the authority’s high current debt levels, possible difficulty in making further rate changes and possible lower than expected traffic growth as challenges to the authority’s credit rating.

The Turnpike Authority expects a series of new borrowings totaling $4.6 billion between 2013 and 2018 to fund the balance of the 10-year, $7 billion capital plan. The plan will be entirely debt-funded and anticipates improvements to both the Turnpike and Parkway.

Assigning an A rating with a stable outlook, Fitch also cited the system’s critical transportation service.

In a report, analysts noted that while total traffic has declined 2.8% on average from 2000 to 2007, Turnpike traffic has grown at a 2% compound annual growth rate over the same period.

Standard & Poor’s gives the bonds a higher rating than the other agencies do and also assigns a stable outlook.

“The A-plus rating reflects our assessment of the toll roads’ essential position, combined with a stable operating profile and low toll structure,” said analyst Adam Torres.

In a competitive sale on Wednesday, New Hampshire is scheduled to sell $113 million of Turnpike system revenue bonds to finance construction projects on the New Hampshire Turnpike.

The bonds will mature from 2013 through 2042, and some maturities will be subject to early redemption.

Bond counsel is Edwards Wildman Palmer LLP and the financial advisor is Public Resources Advisory Group.

The bonds will also be backed by revenues from the Turnpike system, including tolls, rates, rents, fees and other income derived by the state from the ownership or operation of the Turnpike system.

The Turnpike system includes the 39.5-mile Central Turnpike that connects the cities of Concord, Manchester and Nashua, the 33.2-mile Spaulding Turnpike, and the 16.2-mile Blue Star Turnpike, which runs from the Massachusetts border to Maine’s border.

Proceeds from the sale will be deposited into a construction account and will be used to finance construction, right-of-way acquisition, engineering and administrative costs for its three turnpikes.

The projects are included under the Turnpike’s capital improvement program, which is currently estimated to cost $1.03 billion through fiscal 2018. The program is funded through bond proceeds, investment earnings, available toll revenues and federal funds.

As of June 30, 2012, over $681 million has been expended on the program.

Moody’s assigned an A1, citing the Turnpike’s long history of steady traffic and revenue growth and strong financial performance given its location in southeastern New Hampshire.

“The Turnpike network attracts largely passenger traffic and carries both commuter traffic to and from Boston, and the network is an integral portion of the only major route connecting Massachusetts to Maine,” analysts said in a report.

The rating agency revised its outlook to stable from positive due to the Turnpike’s substantial draw on cash as well as recent declines in traffic trends.

Fitch assigned the bonds an A and Standard & Poor’s assigned an A-plus. Both gave stable outlooks.

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Transportation industry New Hampshire
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