DALLAS — The Texas Transportation Commission plans to start 2015 with a $1.6 billion refunding of most of the outstanding debt for the Central Texas Turnpike System.
The deal, expected early next year, will follow a $1.6 billion issue for new money and refunding issue this week. The commission authorized both issuances in meetings in November.
The commission, which supervises the Texas Department of Transportation, authorized the refunding up to $2 billion of debt used to build the Central Texas Turnpike System in the Austin area.
The upcoming issues could refund a $900 million Transportation Infrastructure Finance and Innovation Act loan, the largest ever granted at the time. The turnpike system's total debt, including the TIFIA loan, is $2.15 billion.
The Texas Department of Transportation built and manages the turnpike system. The commission authorized TxDOT chief financial officer James Bass to refund the debt in one or more issues.
TxDOT, which issues bonds under the name of the TTC, is expected to end 2014 with a record $5 billion of bonds, making it the largest issuer in the Southwest.
"Thanks to rates staying low and going even lower in the market, there could be an opportunity to achieve more savings by refunding additional bonds," TxDOT chief financial officer James Bass told the commission at its Nov. 20 meeting.
Bass estimated potential savings "in excess of $200 million" or nearly 10%, which TTC Chairman Ted Houghton called "amazing."
This month's new money TTC deal will carry Texas' triple-A general obligation bond rating, but the CTTS refunding bonds will have lower ratings, enticing investors looking for higher yields on large tranches of debt.
Previous issues for the CTTS were rated A-minus by Standard & Poor's, Baa1 by Moody's Investors Service, and BBB-plus by Fitch Ratings.
The CTTS last refunded $837 million of bonds in 2012. The Series 2012A bonds refunded $708 million of Series 2002A current interest bonds for estimated net present value savings of $46.9 million, or about 6.6%. Those bonds reach final maturity in 2041.
The $151 million of Series 2012B bonds refunded Series 2009 put bonds ahead of the mandatory tender date. The new mandatory tender date is Feb. 15, 2015.
The Central Texas Turnpike System has three toll roads in the Austin area: State Highway 130, a 49-mile north-south road located to the east of Austin; State Highway 45 North (45N), a 13.2-mile road; and Loop 1, a 3.5-mile road both in Travis and Williamson counties.
All three projects, except for one segment of the SH 130, were completed ahead of schedule and under budget by approximately $438 million, primarily due to lower than expected construction bids and good weather.
Full tolled operation began in September 2008 for all three roads after a phased opening, starting with Loop 1, followed by SH 45 and then by SH 130 segments 1-4.
Fiscal year 2009 was their first full year of operation.
On Jan. 1, 2013 the commission raised toll rates by 50% for SH 45 and Loop 1 and 25% for SH 130. That accelerated the prior planned toll increases expected on Sept. 1, 2015 and at 10-year intervals thereafter.
The commission adopted annual automatic toll increases based on the consumer price index beginning on Jan. 1, 2014 as well as various customer service center charges.
Toll rates will be escalated based on the rate of inflation forecast to continue at 3% percent annually through 2042.
The amended toll rate generated $15 million of additional revenue in fiscal year 2013 compared to the prior toll rates and is expected to produce $140.6 million of total additional revenue through 2042.
Standard & Poor's affirmed its A-minus rating in January while keeping the outlook stable.
"The A-minus rating reflects our view of the system's expected revenues from tolls, historically strong demographic trends that have contributed to highly congested traffic conditions, solid equity contributions to overall project costs, and significant programmatic oversight and operational support from the commission and the Texas Department of Transportation," analyst Todd Spence wrote.
"In addition, we believe the facility exhibits a favorable project structure with subordinate debt and maintains strong senior-lien debt service coverage," Todd added. "In our opinion, key offsetting risks pertain to the inherent complexity and difficulty of generating reliable traffic forecasts and revenues and an ascending debt service schedule that requires steady revenue increases."
The 48-mile segment of SH 130 operated by the CTTS connects to another 41-mile segment built and financed by a private consortium known as the State Highway 130 Concession Co. The $1.35 billion project opened to traffic in 2012.
Faced with lighter-than-anticipated traffic on the newly opened section of the tollway, the company renegotiated its loan payment schedule after the Moody's credit rating on a $438 million TIFIA loan fell to junk status.
Despite the new loan terms, Moody's said it considered the partial payment a default.
"By executing the waiver agreement, we understand that the project is not in legal default under its senior loan and swap agreements given the waiver was signed by all senior lenders and swap counterparties," analysts John Medina and Chee Mee wrote in a July 8 report. "However, Moody's view is that the failure to meet the full payment that was originally scheduled for June 30th, 2014 constitutes a 'default' under Moody's definition."
On Oct. 15, 2013, Moody's dropped the senior-lien rating to Caa3 from B1, warning that the toll road was headed for default. The TIFIA loan is not affected at this point because the project is not in legal default, according to Moody's.
Cintra is also a partner with Macquarie Infrastructure Partners in ITR Concession Co., the operator of the 157-mile Indiana Toll Road that declared Chapter 11 bankruptcy in September.
ITR struggled with overly optimistic traffic projections coupled with a debt-heavy capital structure and a $2.15 billion liability tied to swaps.
