Fitch Ratings yesterday returned $2.1 billion of Massachusetts Turnpike Authority debt to negative watch after the authority on Tuesday postponed a toll increase set for this week that would have generated $100 million annually.
The rating agency on March 5 removed MassPike's $2.1 billion of Metropolitan Highway System bonds from negative watch and assigned a negative outlook to the debt after the February approval of a toll hike on March 29. Without the additional toll revenue, the authority will use an estimated $13 million from its $54 million cash-reserve fund to meet debt service costs and operating expenses for the rest of fiscal 2009, which ends June 30.
Instead of raising tolls this week, MassPike plans to implement the toll increases on July 1 to garner the additional $100 million of annual revenue if state legislators fail to allocate funds to the authority by that time.
"The latest reversal is another decision in a long history of resistance to toll increases and further underscores the continued challenges faced by the authority to act decisively and reliably to protect the interests on bondholders and users of the facility," Fitch said in a press release. "If the July 1, 2009, toll increase is not implemented or additional sources of revenue are not provided, this credit will likely draw on more cash reserve funds and edge closer to potential default, whereby more severe negative rating action is likely."
In response to yesterday's action, MassPike executive director Alan LeBovidge said he understands where Fitch is coming from, but stressed that the authority will gain the needed funds by July either from the state or through the toll hike.
"Come July, if we don't either get more money ... we'll be downgraded," he said. "And the board's intent is to [implement] a toll increase if they don't get money from the state. And we're going ahead to get ready for a July 1 toll increase should the legislature not act."
Fitch rates $1.2 billion of MHS senior bonds at BBB-plus and its $960 million of MHS subordinate debt at BBB. Moody's Investors Service assigns a Baa2 to the senior-lien bonds and a Baa3 to the subordinate debt with a developing outlook.