DALLAS — Moody's Investors Service upgraded San Joaquin Hills Transportation Corridor Agency's revenue bonds to Ba2 from B1 two months after the toll-road operator restructured $1.4 billion of debt.
The refinancing extends debt repayment by eight years and lowers interest rates. The new structure also lowers annual debt service growth to 1.6% from the prior 8.8 % for the next decade and reduces maximum annual debt service to $186 million from $269 million.
"Additional credit improvement is provided by stronger legal covenants under a restated 2014 master indenture governing all bonds," Moody's analyst Maria Matesanz said. "The upgrade also acknowledges the stronger recent growth in the service area economy that is contributing to traffic growth despite toll increases."
Standard & Poor's upgraded the agency's senior-lien bonds to BBB-minus from BB-minus in advance of the Oct. 22 refunding deal. The junior-lien bonds were rated BB-plus with a stable outlook.
The agency, which operates State Route 73 in Orange County, has $2.09 million of debt outstanding, including $696 million senior-lien bonds.
The interest rate on the restructured bonds averages 4.74%, according to Amy Potter, the toll agency's chief financial officer. The previous average was 5.72%.
"The combination of low interest rates, improved credit rating, and strong investor response resulted in a net present value savings of $44 million," Potter said in a statement after the pricing.
Chief executive officer Michael Kraman said the restructuring will help San Joaquin Hills moderate future toll rate increases, withstand economic downturns and "potentially pay off the debt ahead of the 2050 final maturity date."
