Two Upgrades Boost North Texas Tollway Refunding

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DALLAS - With the benefit of two rating upgrades, the North Texas Tollway Authority expects to continue reducing its annual debt service with a $744 million refunding, said chief financial officer Horatio Porter.

"This has been a very methodical effort on our part beginning in early 2014," Porter said. "The refinancing transactions we've done have helped us reduce our maximum annual debt service quite significantly."

The bonds are scheduled for final pricing on Thursday, Porter said. An investor call will be held on Tuesday, with pre-pricing on Wednesday.

Barclays is book runner on the deal with Loop Capital Markets as co-senior manager. Barclays managing director John Daniel shares lead banker duties with Loop Capital managing director Curtis Flowers.

Ron Davis, vice president at First Southwest Co., is NTTA's financial advisor.

In a holiday shortened week, Porter described the bond market as "choppy and volatile with quite a bit of uncertainty" stemming from Puerto Rico's debt crisis, China's financial turmoil, upheaval in equities and the possibility of a Federal Reserve rate hike this month.

"There's a lot of noise out there," he said.

The NTTA board has authorized refunding of up to $1 billion of 2008 debt, but Porter said the deal is likely to end up in the $750 million to $760 million range. At that size, NTTA will have refunded about $1.7 billion of debt this year. No more issues are expected in 2015.

Based on a par amount of $764 million, NTTA expects net present value savings of about $52 million or 7%, and a reduction in maximum annual debt service of $17 million. That would bear out with a true interest cost of 4.46%, according to an NTTA presentation to the ratings agencies.

NTTA's new metrics won upgrades from both Moody's Investors Service and Standard & Poor's, the first since the global financial crisis of 2008.

"Both agree that we aren't the same agency we were in 2008," Porter said.

Moody's lifted the senior-lien rating to A1 from A2 Aug. 27, while S&P raised its rating to A from A-minus Aug. 28. Outlooks are stable. Both ratings also upgraded second-tier debt by one notch.

"The raised rating on the authority's first-tier bonds reflects our view of the economic strength of the region, which has seen significant development along the corridors where NTTA's roads are located as well as recent traffic and revenue performance that is strong and meets or exceeds previous forecasts," S&P analyst Todd Spence wrote. "The raised rating further reflects our view of the significant savings from refundings and restructurings."

After rapid expansion of its toll road system and debt doubling in 2008, NTTA carries $7.877 billion in total debt outstanding, according to Moody's.

Moody's analyst Maria Matesanz said the ratings on NTTA's three tiers of debt "acknowledge NTTA's very high leverage of 12.57 in FY 2014, down from nearly 14 times in FY 2013," but cited the same factors as S&P in bringing the upgrade.

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Transportation industry Texas
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