Standard & Poor’s last Thursday lowered its long-term and underlying rating on two series of Alameda Corridor Transportation Authority bonds just two weeks after Fitch Ratings affirmed the agency’s ratings.
ACTA operates the 20-mile freight rail line that connects Los Angeles County-area ports to Union Pacific Railroad and Burlington Northern Santa Fee Railway main lines near to downtown Los Angeles.
Standard & Poor’s downgraded the underlying rating on ACTA’s $956 million of senior-lien revenue bonds to A-minus from A, and dropped the existing subordinate-lien revenue bonds to BBB-plus from A-minus. The outlook on all of the ratings is stable.
The lowered ratings reflected Standard & Poor’s view of the authority’s high debt burden and escalating debt-service schedule, according to Todd Spence, an S&P analyst.
Spence also cited the transportation agency’s low debt-service coverage of 0.95 times provided by net operating revenues, or 1.38 times if port contributions are included.
ACTA is a joint-powers authority created by the city and port of Los Angeles and the city and port of Long Beach. It was tasked with constructing, financing and operating the corridor.
On Dec. 13, Fitch affirmed its A rating on the corridor authority’s senior-lien revenue bonds and affirmed the BBB-plus rating on its $711 million of subordinate revenue bonds.
Analysts also revised the rating outlook to stable from negative.
The corridor handles around 35% of all container traffic for the two largest ports in North America, analysts said in the report.
They cited the financial support the authority receives from the double-A rated ports for the ratings assigned by Fitch to the ACTA bonds.
“In 2011, each port paid $2.95 million in shortfall advance payments to help cover 2011 debt service,” the Fitch report said. “The financial health of the ports is more than adequate to meet their commitment to cover up to 40% of any debt-service shortfall at ACTA.”
