PHOENIX - Toll road performance is having a smooth ride, Fitch Ratings said in a report released Monday.
The agency’s Peer Review of U.S. Toll Roads provides an annual snapshot of Fitch’s U.S. toll roads portfolio. Fitch divides those ratings into two groups -- large networks and monopolistic urban bridge systems, and small networks and stand-alone toll road facilities.
The report looks at various factors for toll roads, such as completion risk for projects under construction as well as debt structure and traffic volume. Fitch presented a sunny picture of the sector, particularly for the large network debt, which is overwhelmingly investment-grade.
“Fitch has observed positive operating performance across the sector since the last Peer Review,” the agency said in a release. “Favorable growth has led to ratings upgrades on three toll roads:" E-470 Public Highway Authority in Colorado; Rickenbacker Causeway in Florida; and San Joaquin Hills Transportation Corridor Agency in California, the rating agency said. It has led to "a positive outlook" on one other roadway-- the Central Texas Turnpike System against zero negative rating actions, Fitch said.
The rating outlook for Fitch’s toll road universe is largely stable. However, continued positive operating performance could result in a rise in raising the rating outlook on several other toll roads to positive, Fitch said.
About 94% of toll road sector ratings, not including managed lanes, are currently subject to stable outlooks, the report said. That means that significant rating changes are not likely in the near future.
“However, positive operating performance trends across the sector developed in recent years, and, if this trend continues in the absence of large capital plans, an increasing number of U.S. toll road credits could see outlooks revised upwards,” the rating agency said.
The report was not dramatically different from the previous toll road review, which was released in December of last year. In that report, Fitch noted it had taken eight positive rating actions and no negative rating actions in the sector over the previous year, and that the same 94% segment of the sector was subject to a stable outlook.
Fitch offered comments on the recent Hurricane impact on toll roads in the Houston area, which has experienced dramatic flooding in the aftermath of Hurricane Harvey’s landfall late last month.
“Hurricane Harvey has resulted in Houston area toll roads like Harris County Toll Road, Fort Bend County Toll Road and Grand Parkway either temporarily waiving tolls or closing the roadways outright, said Fitch analyst Tanya Langman, who was lead author on the report.” The extensive flooding brought on by Hurricane Harvey will inevitably result in toll revenue losses and delay construction and passage on Houston-area toll roads for some time, though each roadway has ample financial cushion to absorb a short term interruption in operations. It is important to note, however, that the magnitude of financial impact from demand dislocation and the extent of structural damage may prove to be more extensive than historically seen with toll roads exposed to hurricane damage. Fitch will continue to monitor the aftermath of Hurricane Harvey and will incorporate its findings into its ratings as applicable.”
