NTTA Expects Nearly 12% Savings on $499.5M Toll Revenue Bond Refunding

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DALLAS — The North Texas Tollway Authority expects $57.8 million or 11.7% of net present value savings when it refunds $499.5 million of bonds issued in 2008, officials said.

The negotiated deal is expected to price Wednesday with Bank of America Merrill Lynch as book runner and Barclays as co-senior manager. NTTA chief financial officer Horatio Porter is supervising the issue.

With this deal, NTTA has about $7.62 billion of debt, according to Moody's Investors Service.

The bonds will be issued in two series. The $350.4 million Series A are first-tier bonds, while the $149.1 million Series B are second-tier.

Moody's rates the first-tier bonds A2 and the second-tier A3.

Standard & Poor's rates the first-tier A-minus and the second-tier BBB-plus. Outlooks are stable.

"The A-minus rating on the authority's first-tier bonds reflects our view of the highly leveraged system of toll facilities that increasingly relies on higher traffic and revenue growth levels to support adequate senior- and subordinate-lien projected debt service coverage under moderate downside stress scenarios," S&P analyst Todd Spence wrote. "The BBB-plus rating reflects our view of the second-tier bonds' subordinate status."

The bonds refund issues from 2008, when NTTA was struggling to raise $3.2 billion for the Sam Rayburn Tollway (State Highway 121) amid a collapsing financial market.

In addition to the worsening recession, NTTA had to cope with the collapse of Lehman Brothers, one of its swap partners on variable-rate debt.

This time, NTTA can expect a big appetite for its bonds as interest rates remain near historic lows in an extremely lean year for issues of any kind.

NTTA, which has been on a building binge in the last decade, has no plans for new debt, according to Moody's.

"Debt to operating revenue of over 13.76 in FY 2013, though improved from 14.9 times in FY 2012, remains among one of the highest in the rated peer group of government-owned toll roads," analyst Maria Matesanz noted. "Assuming no additional debt-funded project we expect NTTA's high leverage will continue to moderate in coming years with increased revenue growth from traffic and toll increases."

With the Texas Department of Transportation struggling to fund highway projects in the rapidly growing state, NTTA has become the de facto highway builder in the Dallas-Fort Worth area.

The authority, operating under a separate lien structure, recently completed its first project in Tarrant County, the Chisholm Trail Parkway that crosses through Fort Worth and ties into NTTA's existing system of tollways.

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Transportation industry Texas
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