North Texas Tollway Authority Hits The Brakes Amid Market Pileup

DALLAS - A year after agreeing to the largest debt issuance in its history, the North Texas Tollway Authority is rethinking plans to expand its system amid unprecedented market turmoil.

"It's been a very traumatic time," said Daniel Heimowitz, managing director at NTTA's financial adviser RBC Capital Markets Inc. "A very traumatic time."

In a meeting where it had planned to vote on whether to complete the $1.3 billion State Highway 161 tollway west of Dallas, the NTTA board on Wednesday put off the decision due to market events. A key concern was how the Lehman Brothers bankruptcy might affect the NTTA's debt portfolio.

Lehman was the senior manager on a $1 billion revenue bond issue in July and co-manager of a $600 million issue last week. The authority also has swaps through Lehman that could result in termination payments of $6 million to $8 million.

Since the NTTA's Wednesday meeting, British bank Barclays PLC has agreed to buy Lehman's assets out of bankruptcy, adding a level of comfort to issuers who did business with the underwriter.

"The fact that Barclays is buying them bodes well for us," said NTTA spokeswoman Sherita Coffelt, though she added that the Lehman bankruptcy would have had "minimal impact on NTTA."

Nonetheless, the authority's chairman, Paul Wageman, cited Lehman's role in underwriting its bonds as a factor in postponing the decision on SH 161 until October, the last chance to accept the deal.

"The NTTA's primary focus is strengthening our financial position for the bondholders and the citizens of North Texas," Wageman said.

The authority still needs to issue about $325 million of long-term bonds to complete the takeout of $3.5 billion of bond anticipation notes before the end of November. That debt was issued for an up-front payment to the Regional Transportation Council, a planning arm for regional governments, for the rights to build the 26-mile State Highway 121 north of Dallas.

Under its bond covenants for SH 121, the NTTA cannot issue more debt if rating agencies say it would endanger its "A category" senior-lien bond ratings.

Standard & Poor's has submitted its findings on how a new debt issue would affect the authority's current ratings, but the reports were not made public. As of Wednesday's meeting, the NTTA board had not received the report from Moody's Investors Service. Fitch Ratings was fired after it lowered the authority's rating to the triple-B category last year.

In its most recent public rating report, Standard & Poor's affirmed its A-minus long-term rating on senior-lien revenue bonds and BBB-plus on subordinate-lien debt. Moody's rates the first-tier bonds A2, with an A3 on the second-tier debt.

Another factor that is causing delay at NTTA is whether a federal Transportation Infrastructure Finance and Innovation Act loan will be available. The SH 161 financing is contingent on TIFIA financing 43% of the project's cost.

"We have been told by the TIFIA staff that for the first time, the program has more applicants than funds," Heimowitz said.

The SH 161 financing would be a standalone project that would have no claim to tolls from the other NTTA tollways, Wageman said. But with $7 billion of projects planned, the agency is reconsidering its financial position.

"We have been looking at all the projects on our list, and looking at when will these projects be ready to go, when will we actually need the money to get started?" said NTTA president Jorge Figueredo. "But if the markets continue to go sour and TxDOT and RTC and ourselves don't have ability to leverage each other, then what we thought was possible a year ago will likely not be possible."

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Transportation industry
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