SAN FRANCISCO — The agency that runs the long-struggling San Joaquin Hills toll road in California is asking for a nod from bondholders to restructure its debt portfolio to stay afloat.
The San Joaquin Hills Transportation Corridor Agency in Orange County wants investors to allow it to amend bond indentures and to extend the maturity dates on some of its toll road revenue bonds to keep rising debt-service payments in check.
"The financial difficulties go along with the historic revenues that we have been collecting on the toll roads that have been below original projections, and the recession has exasperated the issue," said spokeswoman Lisa Telles. "These amendments and some restructuring of the debt will allow us to bring the debt payments in line with what we are expecting the revenues to actually be."
The agency has more than $2 billion of outstanding debt from revenue bonds issued in 1993 and 1997.
Telles said the San Joaquin authority has been working on a plan to restructure its debt for two years.
The agency's revenue reached only 69% of its original forecasts in fiscal 2010, according to Moody's Investors Service.
The San Joaquin Hills agency was formed in 1986 along with the Foothill/Eastern Transportation Corridor Agency to plan, finance, and operate Orange County's 67-mile public toll road system. Both joint-powers authorities are legally separate operations but are managed under the same roof.
The San Joaquin Hills toll highway, opened in 1996 as the State Route 73 toll road, runs 16 miles from the southern end of the county toward Newport Beach and John Wayne Airport.
All bondholders are being asked to consent to changing the San Joaquin Hills agency's debt-service coverage ratio requirements to 1.0 times from 1.3 times. Holders of five series totaling $430 million in convertible capital appreciation bonds with maturities from 2018 through 2024 are also being asked to consent to having their original maturity dates extended, reducing debt service burdens for the next 13 years, according to a news release from the agency.
The changes would save $550 million in debt service costs from fiscal 2012 through fiscal 2024, but debt service in each fiscal year from 2025 through 2036 would rise by $43 million. The bonds' final maturity would be extended from a final date of 2036 to 2042, according to a disclosure document filed with the Municipal Securities Rulemaking Board.
In addition to bondholder consent, the restructuring needs approval from National Public Finance Guarantee Corp. because it insures many of the bonds.
"National is supportive of the requested amendments to the San Joaquin Hills Transportation Corridor Agency's bond indentures and anticipates providing its consent," Adam Bergonzi, NPFG's chief risk officer, said in an e-mailed statement. "The amendments will improve the agency's financial position and enhance its financial flexibility going forward."
San Joaquin officials anticipate a final agreement in two to four weeks.
Telles said the agency's budgeted fiscal 2011 revenues are more than $100 million, which includes tolls as well as other revenues such as fees and fines.
Its fiscal 2011 budget includes a 37% reduction in operating expenses from a year earlier, flat traffic and revenues, and no toll increase.
Moody's said in a January report that the tollway's traffic and revenues seemed to be leveling out in fiscal 2011. It said San Joaquin's revenue rose slightly in fiscal 2010 because of a toll rate increase the previous year. This fiscal year will be the first year San Joaquin did not raise tolls since 2002, according to Moody's.
"Absent either continued financial support from [the Foothill/Eastern agency], debt restructuring, or dramatic increases in traffic and toll revenues, the agency likely will not be able to meet escalating debt-service requirements," Moody's analyst Maria Matesanz said.
The rating agency said San Joaquin's annual debt-service payments have risen to $115 million this fiscal year from $99 million in fiscal 2010. They are slated to peak at $225 million in fiscal 2033.
"We think there is a point the revenues are not going to be coming in to make sure we meet all of our obligations, and we are getting close to that date," Telles said.
The agency maintained its 1.34 times debt-service coverage ratio in fiscal 2010 only because of a $28.7 million transfer from a backup account funded by mitigation payments from its Foothill/Eastern sister agency. Without the transfer, the ratio would have been 0.94 times.
The San Joaquin Hills agency inked the mitigation and loan agreement with the Foothill/Eastern agency to offset the impact from a southern highway extension by Foothill/Eastern that would divert some traffic from its sister agency's toll road.
Foothill/Eastern has paid $120 million since 2007, but its planned extension has stalled in the regulatory process and those mitigation payments turn into loans if it fails to build the extension by the end of 2015.
Managers of the two agencies have twice tried to engineer a bond-financed merger to combine them. The most recent effort fell apart in 2009 because of the weak economy. Telles said the merger could still happen if revenues recover.
Moody's has an underlying rating of Ba2 on San Joaquin Hills bonds with a negative outlook, while Standard & Poor's rates them BB-minus with a stable outlook and Fitch Ratings rates them BB with a negative outlook.