The bonds will be issued by the Texas Transportation Commission, which operates the toll system through the Texas Department of Transportation. This week's refunding deal through senior manager JP Morgan precedes a $1 billion TTC issue coming to market the first week in December.
S&P raised its rating to A-minus from BBB-plus and maintained a stable outlook, citing the system's expected revenues from tolls, "historically strong demographic trends that have contributed to highly congested traffic conditions, solid equity contributions to overall project costs, and significant programmatic oversight and operational support from the commission and the Texas Department of Transportation."
Moody's Investors Service affirmed its Baa1 rating, while Fitch Ratings affirmed its BBB-plus, both with stable outlooks.
The improved rating is expected to improve savings for the CTTS and improve the system's ability to direct additional revenues toward other priority transportation projects in the region.
"This bond rating increase is a true win for Texans who value the central Texas roadway system and want similar projects to be successful around the state," said Ted Houghton, chairman of the Texas Transportation Commission.
"We're executing with the tools and flexibility the Legislature has given us to move forward with priority projects for Texans," said Phil Wilson, TxDOT executive director.
The upcoming deal will include $687.2 million series 2012-A first-tier revenue refunding bonds and $151.1 million series 2012-B of first-tier revenue refunding put bonds.
The 2012A bonds will refund $707.875 million Series 2002A current interest bonds for estimated net present value savings of $46.9 million, or approximately 6.6% of the refunded bonds. While there is no extension of final debt maturity, and level savings are taken through 2037, there is some back loading of principal from 2037 through 2041, according to Moody's.
The Series 2012B bonds will refund the Series 2009 put bonds ahead of the mandatory tender date of Feb. 15, 2013. The new mandatory tender date is Feb. 15, 2015.
In the event that any bonds cannot be remarketed to new purchasers on the mandatory tender date, the commission has no obligation to purchase the bonds tendered.
The TTC also has a federal loan from the U.S. Department of Transportation under the Transportation Infrastructure Finance and Innovation Act (TIFIA) of 1998, which it has drawn in the amount of $900 million.
Interest on the 2002 TIFIA loan is payable semiannually beginning Feb. 15, 2010. Principal amortization on the TIFIA loan is payable annually beginning Aug. 15, 2025, with final maturity July 15, 2042.
>CTTS started construction in 2003 with proceeds of $1.15 billion Series 2002-A and $150 million Series 2002-B bonds. The system now has three toll roads in the Austin area: State Highway 130, a 49-mile north-south road located to the east of the city of Austin; State Highway 45 North (45N), a 13.2-mile road located in Travis and Williamson counties; and Loop 1, a 3.5-mile road also located in Travis and Williamson counties.
All three projects, except for one segment of the SH 130, were completed ahead of schedule and under budget by approximately $438 million, primarily due to lower than expected construction bids and good weather.
Full tolled operation began in September 2008 for all 3 roads after a phased opening, starting with Loop 1, followed by SH 45 and then by SH 130 segments 1-4.
Fiscal Year 2009 was their first full year of operation.
The roads were developed to provide traffic congestion relief in the service area and provide a faster path for the truck traffic that chokes Interstate 35, which is sometimes called the NAFTA corridor, for the North American Free Trade Agreement.
The project received a $700 million equity contribution from TXDOT as well as substantial right-of-way contributions from municipalities that helped lower development costs.
At completion the turnpike system's 2002 project became part of the state highway system.
The rate covenant requires the commission to set rates sufficient to comply with the rate covenant as recommended by the independent traffic consultant. The commission has the independent authority to set rates, which analysts at S&P consider a credit strength.
Outside the purview of the turnpike system, a new 40-mile section of SH 130 south of the CTTS segment opened last month between Austin and San Antonio with a speed limit of 85 mph, the highest speed limit in the U.S. The new section was built by the consortium of Cintra-Zachary as a public-private partnership operating under the name State Highway 130 Concession Company.
The concession will collect tolls to be shared with Texas for 50 years and will maintain and upgrade the highway. To avoid toll booths, the operators use a high-resolution scanning system created by Raytheon Corp. to read license plates or a pre-paid "TxTag" visible on a vehicle's windshield.
Those without the TxTag will pay about one-third more and will receive a bill sent by the Texas Department of Transportation to the registered owner of the vehicle.
The newly opened segment of SH 130 is identified as sections 5 and 6 and nicknamed the "Pickle Parkway" in honor of the late Congressman J.J. "Jake" Pickle, who represented Austin in the U.S. House of Representatives.
The privately financed section of SH 130 runs from Interstate 10 near San Antonio to adjoin section 4 of SH 130, which was part of the CTTS 2002 Project.
Total financing for the 65 miles of the 2002 Project was $3.6 billion, including design, construction, right of way acquisition, and other financing costs.
State transportation officials said that the CTTS project was completed almost 25 years sooner than conventional transportation construction projects due to the innovative financing.
In the case of the so-called "Pickle Parkway," SH 130 Concession Company invested a total of $1.4 billion in the project, including $140 million in concession payments to the state for investment in TxDOT's Austin and San Antonio Districts.
Beginning this week, the toll rate on sections 5 and 6 is set at $0.15 per mile for passenger vehicles using the TxTag system.