As toll roads go cashless, the sector outlook turns negative

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With some toll roads going cashless to limit human contact during the COVID-19 outbreak, two rating agencies have turned the sector outlook negative as more people telecommute, schools close, public gatherings are limited and some businesses close their doors, voluntarily or otherwise.

U.S. toll road traffic and revenue will decline in the first half of 2020 because of the expanding coronavirus outbreak and the unprecedented public health response, Moody's Investors Service said Friday, revising its sector outlook to negative from stable.

The Bay Area Toll Authority in the San Francisco region is among the operators to cease cash toll collections because of the COVID-19 pandemic.

"If public health measures are effective, the negative impact will be smaller, but if they prove ineffective, stricter measures may be implemented that will have an even greater negative effect on traffic and revenue," Moody's analysts said.

S&P Global Ratings revised its outlook on toll roads as well as the airport and parking facilities sectors to negative March 16 as COVID-19 responses bring travel restrictions and the economic fallout reduces overall mobility, with a prolonged or steeper decline likely to pressure credit quality, said its analysts.

"We see credit exposures for airlines, airports, consolidated rental car facilities at airports, ports, toll roads, transit operators and parking facilities, all of which have issued debt supported by revenues that are affected by activity levels," S&P analysts said.

In Louisiana, which has seen an exponential rise in positive COVID-19 cases since the first presumptive one was announced March 9, Gov. John Bel Edwards has issued a statewide "stay at home order" to begin at 5 p.m. Monday. It will last through April 12, but could be extended.

“In Louisiana we have taken aggressive measures to mitigate the spread of COVID-19 and flatten the curve; however, this is not enough," Edwards said in a statement. "As our number of cases continue to grow, I am directing all Louisianans to stay at home unless it is absolutely necessary for you to leave."

Edwards said people can leave their homes to do essential things like buy groceries, food, or medicine. Others can "go to work only if their job is essential."

On Monday, the Louisiana Department of Health reported 837 cases of the new virus in 36 of 64 parishes, and 20 deaths. Nearly half of the cases are in the region that surrounds New Orleans.

The Louisiana Department of Transportation and Development is giving GeauxPass toll tags away during the pandemic to encourage motorists to avoid making cash payments and to pay tolls electronically.

"This will allow for social distancing to reduce the risk of spreading the coronavirus," the LDOTD said.

Other entities suspending cash toll collections include the Florida Turnpike Enterprise, the Illinois Tollway, the Bay Area Toll Authority, the Maryland Transportation Authority and the Pennsylvania Turnpike.

In addition to Louisiana, other states ordering non-essential residents to "stay at home" include Ohio, California, Illinois and New York. On Monday, Massachusetts’ governor ordered all non-essential businesses to close.

Fitch Ratings said that it's categorizing the agency's ratings into higher and lower risk sub-sectors and is grouping credits within those sub-sectors based on their flexibility to absorb stress from the pandemic at their current rating level.

"It is Fitch's view that demand-based transactions will be most affected at the outset with contracted transactions feeling the knock-on effects as the crisis evolves," said Cherian George, Fitch's global head of infrastructure and project finance.

"Toll roads are affected with commuter volumes significantly declining," he said. "Though these assets are exposed to broader economic weakness and the nature of the recovery, they are also more likely to have volumes return faster as life returns to some normalcy."

On Monday, Fitch placed the ratings of five large U.S. public transit agencies on rating watch negative.

Those are the Metropolitan Transportation Authority in New York, the San Francisco Bay Area Rapid Transit District, the Washington Metropolitan Area Transit Authority, the Metropolitan Atlanta Rapid Transit Authority, and Colorado's Regional Transportation District.

Kroll Bond Rating Agency said it's monitoring ratings across all sectors for direct and indirect impacts from the outbreak, and at this point risks are skewed to the downside.

"Extended disruption due to virus contagion concerns could also impact volume risk infrastructure assets such as toll roads, if people decide to work from home or postpone business and personal travel, ports, if there is a continued and substantial disruption of world trade, and social infrastructure if schools postpone classes for student housing," said Kroll analysts.

Projects that are under construction could experience delays due to global supply chain disruption, they added.

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Coronavirus Transportation industry Toll revenue bonds John Bel Edwards Ratings Louisiana