CHICAGO - The Illinois State Toll Highway Authority is about to price a long planned $400 million refunding that will be followed before spring with new-money borrowing to support an ongoing $12 billion program.
The fixed-rate advance refunding for savings is slated for Tuesday, tollway spokeswoman Wendy Abrams said. The sale will refund bonds from a 2005 issue. "Given that the sole purpose of the refunding is debt service savings, the refunding is market contingent," Abrams said.
Goldman Sachs and & Jefferies are the senior managers. Public Financial Management Inc. and A.C. Advisory Inc. are financial advisors, with Katten Muchin Rosenman LLP serving as bond counsel. The agency had planned to enter the market with the refunding last year but it was postponed due to rising rates that squeezed out savings.
The agency's next new money sale is expected in late February or March with Citi and Barclays Capital as senior managers. Proceeds of the new money will finance projects under the authority's 15-year, $12 billion capital program now in its third year.
The agency has a qualified list of financing firms to draw from, but it has not named the teams for future deals after the next new money sale.
The authority's 2014 budget relies on up to $900 million of new money borrowing to support capital projects this year. "The 2014 budget provides for $1.4 billion in capital investments that will create an estimated 15,200 jobs and help stimulate the local and regional economies," the authority's executive director, Kristi Lafleur, said when the budget was unveiled. "This is the largest amount committed to infrastructure improvements in the agency's history."
The authority operates 286 miles of interstate toll highways in 12 counties in Northern Illinois. The new long-term capital program was approved by the tollway board in 2011.
Some of the projects planned in 2014 include continuing work to rebuild and widen an interstate, continuing construction on a new interchange, construction of the new Elgin O'Hare Western Access toll road to make it easier to get to O'Hare airport, and systemwide roadway and bridge work and planning studies.
The capital program, officially called Move Illinois, aims to reduced congestion and pollution, expand the more than 50-year-old system, improve roads, and create jobs and economic development.
The plan funds $8 billion for improvements to existing roads and $4 billion for new and expanded roadways.
To support the program, the board adopted a steep one-time 87% increase in passenger tolls that took effect in 2012 and a 60% increase in commercial vehicle tolls that will be phased in and then adjusted annually based on inflation in 2018. The tollway saw a 39% jump in operating revenues in fiscal 2012 due to the toll increase, producing 2.86 times debt service coverage.
The agency carries ratings in the low-double-A category from all three rating agencies. Fitch Ratings affirmed its rating Wednesday on the authority's $4 billion of debt secured by a pledge and lien on the net revenues of the tollway system after operating expenses are paid.
Rating agencies have described the authority's significant addition of $5.1 billion of debt to support both the capital program and provide $300 million in additional debt service reserve funding as a challenge but one that is offset by other positive factors.
They include the toll increases; a demonstrated track record for delivering large, complex capital programs within budget and without significant traffic diversion; strong liquidity; and forecasted coverage ratios of more than two times.
Strong liquidity helps mitigate the tollway's above average exposure to variable rate debt which represents 30% of its debt portfolio. Floating-rate securities are expected to drop to about 21% of the portfolio by 2015 as the agency plans an up to $570 million restructuring.
Analysts also said traffic projections pose a risk as they could be impacted by the toll increases. The tollway is projecting higher annual growth levels than it has averaged recently.