The North Texas Tollway Authority enjoyed better-than-expected savings on a $651 million refunding that continues a string of successes in restructuring the authority’s debt, said chief financial officer Horatio Porter.
“We saw net present value savings of $193 million, or what seems even more impressive, 25%,” Porter said of the deal that priced Wednesday through book runner Barclays, with managing director John Daniel as lead banker.
Going into the deal, NTTA was anticipating savings of about $150 million, which Porter said would have been rewarding.
“We knew we had an opportunity to capture savings, but we didn’t think we would have this level of savings,” he said.
The deal featured $429.9 million of first-tier revenue bonds rated A1 by Moody’s Investors Service and A-plus by S&P Global Ratings with 4% coupons reaching final maturity in 2044 at a yield of 2.88%. The new bonds have a 10-year call option.
A second tier of $222.5 million carried ratings a notch lower, but Moody’s has a positive outlook on both tiers, while S&P’s is stable. The second-tier bonds reach final maturity in 10 years with 5% coupons, a yield of 1.87% and no call date.
Porter said he was pleased to see 70 investors participate in the sale, including 28 who were new to NTTA.
“It tells us that NTTA is a well-regarded credit that has gained a lot of recognition,” he said.
Since the tumultuous events of 2008, when NTTA was on a building binge in a collapsing credit market, the authority has been on a winning streak in refunding the debt it struggled to issue during the financial crisis.
In 2008, as NTTA was planning to double its debt with a $3.2 billion development of the Sam Rayburn Tollway in Collin County, the authority was clinging to its A-level ratings from S&P and Moody’s on its senior-lien debt after a downgrade by Fitch Ratings to BBB-plus. To raise the funding for the new project, NTTA provided a covenant to maintain an A-level rating on the senior lien.
NTTA’s involvement in the project came after the Texas Legislature insisted that the project be stripped from a private consortium that had already been awarded the project. At the state’s urging, the NTTA, itself a state agency, put together a bid for the project, which it won shortly before the market collapse.
Since Porter’s arrival in 2013 from his previous post at the city of Fort Worth, NTTA has refunded $7 billion of its $9 billion in outstanding debt.
The centerpiece of NTTA’s debt restructuring came in 2017 with a $2.5 billion refunding that allowed the authority to merge its Special Project System created in 2011 with its main system bonds. The Special Project lien was created with a guarantee from the Texas Department of Transportation to separate the State Highway 161 toll road development from NTTA's main system. Combining the systems would have led to downgrades at the time.
The authority no longer has any variable-rate debt, and revenues from new toll roads have met or exceeded expectations. Expansion of existing projects, including the Sam Rayburn Tollway, will be financed from existing reserves and revenues, Porter said. NTTA has no plans to issue any new-money debt, he added.
Moody's said its positive outlook “reflects our view that the authority will continue to see strong year-over-year traffic growth in fiscal 2019 and beyond supporting higher debt service coverage ratios and a more rapid reduction in leverage than traffic engineer’s forecast suggests.”
