WASHINGTON — The Delaware Transportation Authority intends to sell competitively $121.6 million of Series 2006 transportation system senior revenue bonds next Wednesday to fund a portion of the Department of Transportation’s capital program.
The bonds are being issued to finance improvements to Delaware’s transportation system, according to a report compiled by Moody’s Investors Service, which gave a Aa3 rating and a stable outlook to the upcoming deal.
“The high-quality credit rating is based on the strength and diversity of pledged state transportation revenues, a limit on the issuance of additional debt against these resources, and adequate coverage of debt service payable of $954 million of outstanding parity bonds, the current issue, and $360 million of parity bonds the authority expects to issue in the next six years,” Moody’s analyst Emily Raimes wrote.
Challenges that could adversely affect the sale’s rating include a shortfall in funding for transportation projects that could lead to increased leverage in an already highly leveraged program, Raimes wrote.
Furthermore, the state is not obligated to raise rates or fees to cover outstanding debt and revenues from gas taxes cannot be relied upon.
The bonds will be secured by motor fuel taxes, Delaware Turnpike toll revenues, various fees collected by the Department of Motor Vehicles, as well as various other transportation fees, according to a report issued by Standard & Poor’s, which assigned a AA-plus rating and a stable outlook to the deal.
“The stable outlook reflects the expectation that the system will continue to generate, at minimum, modest annual revenue growth and that the [debt service coverage] will remain strong,” primary credit analyst Harold Burger wrote.
Fitch Ratings did not rate the deal.
Financial adviser on the deal is Public Financial Management Inc., which was adviser to the authority in relation to the sale of 2006 bonds.
The bonds in question are expected to qualify for municipal bond insurance through Ambac Assurance Corp., Financial Guaranty Insurance Co., XL Capital Assurance, MBIA Insurance Corp., and Financial Security Assurance Inc. However, the purchase of any insurance will be left to the discretion of the winning bidder, according to the preliminary offering statement.
Created in 1988 after the merging of Delaware’s Turnpike Authority and its Department of Transportation, the Delaware transportation trust fund is used to finance the state’s transportation projects.
The Delaware Transportation Authority is responsible for some 90% of the state’s roadways, including the Delaware Turnpike, parts of Interstate 95, and a 41-mile section of Route 1. It also operates and subsidizes state transportation services and facilities.
