DALLAS – Blueridge Transportation Group, an international consortium that's adding managed lanes to a major Houston thoroughfare, earned the lowest investment-grade rating from Fitch Ratings on its private activity bonds.
The BBB-minus rating is the same as the expected rating Fitch applied to the bonds before they priced last month. The outlook is stable.
The rating "reflects the project's strategic location within a congested commuting corridor servicing a region that is familiar with tolling and expected to continue to experience healthy, long-term growth despite the recent softening of the regional economy related to the oil industry," Fitch analyst Tanya Langman wrote in the May 9 report.
The $1 billion project to expand State Highway 288 south of Houston is financed through a combination of private equity, private activity bonds and federal loans.
Fitch's BBB-minus rating also applies to a $357 million subordinated loan granted under the federal Transportation Infrastructure Finance and Innovation Act.
SH 288 connects fast-growing residential areas in Brazoria and south Harris County with employment centers in Houston. The public-private partnership was procured through the Texas Department of Transportation.
"The project's two managed lanes in each direction along a 10.3-mile stretch should provide reasonable time savings based on current corridor peak-period traffic, which is expected to increase considerably as the population in the service area grows," Langman said.
The PABs priced on April 27, and the TIFIA loan was priced and the loan agreement was executed on April 28. The project reached financial close on May 9.
The PABs were issued at a premium, raising $298.6 million in proceeds.
Final pricing for the PABs provided yields ranging between 3.64% and 3.93%. Those rates were below expectations, according to Fitch.
"The overall impact of the lower borrowing costs results in slightly higher debt service coverage in Fitch's base and rating case scenarios," Langman said.
The 52-year concession agreement is the first in the Houston area to use a private contractor to design, finance, build, operate and maintain a toll road. The Harris County Toll Road Authority operates most toll roads in the area, along with toll road authorities in Fort Bend and Brazoria County.
Moody's Investors Service issued a provisional rating of Baa3 in advance of the pricing.
"Upon a conclusive review of the final structure and documentation, we will assign definitive ratings," Moody's said.
