SAN FRANCISCO — Southern California’s San Joaquin Hills toll road has gotten a green light from bondholders to restructure $2 billion of debt that helps avoid a default.
The long-struggling San Joaquin Hills Transportation Corridor Agency said in a statement Friday that bondholders have consented to changing agreements that include shrinking coverage-ratio requirements, reducing debt-service payments for the next 13 years, and extending some bond maturities.
The Orange County toll road operator announced in April that it asked investors to allow it to restructure $2.06 billion of outstanding toll road revenue bonds to keep rising debt-service payments in check.
The TCA has struggled for years with its heavy debt burden amid weak traffic that has been made worse by the Great Recession and real estate bust.
Franklin Templeton Investments accepted the most significant change, extending maturity dates for $430 million of convertible capital appreciation bonds.
Franklin Templeton holds $390 million of the bonds in its Franklin California Tax-Free Income Fund and $40 million in the Franklin High-Yield Tax-Free Income Fund, according to data from Ipreo LLC and Morningstar.
Other bondholders include Eaton Vance Corp., Vanguard Group, Putnam Investments, and Nuveen Investments, according to agency officials.
The toll road also reached an agreement with National Public Finance Guarantee Corp., the insurer of some of the 1997 bonds.
All bondholders were asked to consent to indenture changes, notably changing the agency’s debt service coverage ratio requirement to 1.0 times from 1.3 times.
Since no other incentives were offered, the bondholder’s main incentive appeared to be preservation of the toll road’s long-term financial viability. Officials said the agency faced the possibility of missing coverage ratios and debt service payments without the restructuring.
The TCA’s annual debt service in fiscal 2012 had been set to increase $15.9 million to $115 million, or 16%, from a year earlier, according to a filing by the toll road to the Municipal Securities Rulemaking Board. Without restructuring, annual debt service would have peaked at $225 million in 2033.
The toll road has $220 million of outstanding 1993 current interest bonds, $604 million of 1997 current interest bonds, $680 million of 1997 convertible capital appreciation bonds, and $559 million of 1997 capital appreciation bonds.
The Transportation Corridor Agency issued the debt in 1993 to help fund construction of the toll road and refunded most of the debt through the 1997 issue.
The restructuring could save the toll road $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, according to the MSRB filing.
Standard & Poor’s put San Joaquin Hills’ BB-minus rating on negative credit watch after the restructuring proposal was announced.
Moody’s Investors Service has an underlying rating of Ba2 on the bonds with a negative outlook, while Fitch Ratings rates them an equivalent BB, also with a negative outlook.
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 jointly run by the same management team.
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.