New Hampshire Turnpike upgraded before competitive deal

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A declining debt burden helped the New Hampshire Turnpike System to an upgrade ahead of a $41.9 million revenue bond sale.

Moody’s Investors Service upgraded the system to Aa3 from A1 Wednesday citing a successful shedding of past debt requirements coupled with record toll traffic last year. The authority is slated to issue $41.9 million of revenue refunding bonds in a competitive deal Thursday to refund outstanding 2009 Series A bonds.

“The upgrade to Aa3 is linked to a declining debt service profile, leading to stronger debt service coverage ratios and lower leverage over time while maintaining stable traffic and revenue performance and having limited capital needs,” Moody’s analyst Myra Shankin wrote in an Oct. 23 report. “Leverage has improved as the turnpike's front-loaded debt profile continues to amortize.”

The outlook is stable.

Shankin noted that the turnpike system has spent $982 million on capital improvement projects as of June 30, 2019 funded largely by $716 million of bond proceeds. The state is planning an additional $568 million of capital spending through 2030 to be financed through pay-as-you-go funding with no additional borrowing anticipated.

The 89-mile turnpike system is coming off record levels of toll traffic during the 2018 fiscal year of 122.2 million with revenues of $129.4 million. The agency’s unaudited 2019 data showed that toll revenues grew a further 2.8% linked to increased out-of-state users who pay full price compared to New Hampshire-registered vehicles that pay discounts ranging from 10% to 30%.

The state legislature has authority over the location of toll plaza and discount rates, which Shankin noted can pose a credit challenge. New Hampshire lawmakers approved a 10-year transportation plan last year authorizing the state’s Department of Transportation to implement all-electronic tolling “if feasible.”

Thursday’s scheduled $41.9 million competitive sale features PRAG as municipal advisor and Locke Lord as bond counsel. The bonds are secured by a pledge of net revenues from the turnpike system after operation and management expenses. Bondholders also benefit from a cash-funded debt service reserve fund equal to maximum annual debt service, according to Shankin.

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Ratings Transportation industry Toll revenue bonds Primary bond market New Hampshire