Moody’s Investors Service has downgraded the San Joaquin Hills Transportation Corridor Agency’s rating to B1 from Ba2 after the agency completed a restructuring of its debt.
Moody’s said in a report Wednesday that the toll road’s new bond agreements have weakened the rate-covenant test threshold to 1.0 times annual debt service from 1.3 times and have also deferred repayment on $430 million of convertible capital appreciation bonds by up to 19 years.
Moody’s also kept a negative outlook on the credit.
“The negative outlook reflects lingering uncertainty about the fundamental performance of the toll road,” the report said.
The toll road faces an uncertain fiscal future in part because of the unknown pace of the economic recovery locally and the agency’s likely inability to raise tolls, which are already among the highest in the country.
In May, bondholders gave the long-struggling Southern California toll road approval to restructure $2 billion of debt to help avoid a default.
Bondholders consented to changes such as shrinking coverage-ratio requirements, reducing debt-service payments for the next 13 years, and extending some bond maturities.
The San Joaquin Hills toll road 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.