California toll agency debt paydowns bring rating upgrades

Transportation Corridor Agencies

California's twin Transportation Corridor Agencies' efforts to pay down debt early earned upgrades from Fitch Ratings.

The San Joaquin Hills Transportation Corridor Agency's $2.1 billion of senior lien bonds were upgraded to A-minus from BBB-plus May 15 and the $94 million in junior lien bonds to BBB-plus from BBB. The rating outlook remains positive.

The other agency run by TCA, Foothill-Eastern Transportation Corridor Agency, received a May 9 upgrade to A from A-minus on its $2.3 billion in senior lien bonds and to A-minus from BBB-plus on its $221 million junior lien bonds. The rating outlook, previously positive, was revised to stable at the higher rating.

The SJHTCA and F-ETCA are two joint power authorities created to plan, finance, construct and operate 51 miles of toll roads in Orange County.

Fitch cited strong traffic, revenue performance and the agency's commitment to deleveraging through bond buybacks.

SJHTCA completed a $200 million paydown of junior lien bonds in January, which Fitch said demonstrated a commitment to deleveraging. If the agency executes on plans for an additional $96 million in bond buybacks over the next two years, coverage levels would reach 1.7 times, Fitch said.

The early pay down of $200 million in junior lien debt for SJHTCA is part of the agency's strategic plan to reduce debt and implement strategies for cost savings, said SJHTCA board chair and Santa Ana City Councilmember David Penaloza.

"We are pleased with Fitch's rating upgrade, which recognizes SJHTCA's ongoing commitment to early bond paydowns and other debt reduction strategies," Penaloza said.

The agency plans another early paydown of $47 million of callable toll revenue bonds in fiscal year 2026, he said.

The positive outlook for SJHTCA reflects the expectation by Fitch that if traffic and revenue performance continues and it executes on its buyback plan, coverage metrics will rise and result in a further upgrade.

The agencies, which began operating toll roads in the 1990s, had a bumpy fiscal ride at times; their last remaining speculative grade senior-lien rating was upgraded to investment grade in 2017.

SJHTA has limited exposure to maintenance and capital costs because the California Department of Transportation owns and maintains the road. The agency also has no additional debt plans, and its capital improvement plan is small and expected to be cash-funded.

F/ETCA holds a Baa1 rating from Moody's Ratings and A rating from S&P Global Ratings on its senior lien debt. Both assign stable outlooks.

SJHA holds a Baa2 rating from Moody's and A-minus rating from S&P. Both assign stable outlooks.