DALLAS – Toll road credits should see smooth sailing in 2016, as positive performance trends prevalent in 2015 are expected to continue in the new year, Fitch Ratings says in a newly released peer review.
Four positive ratings actions for toll roads this year were prompted by better-than-expected operating performance or debt restructurings since the 2014 review, said Saavan Gatfield, senior director of Fitch's global infrastructure and project finance team.
Approximately 96% of toll road sector ratings, which does not include tolled managed express lane operations, have stable outlooks, he said. There were no downgrades or negative outlook moves for toll roads by Fitch in 2015.
"Dramatic rating changes in the near term are unlikely," Gatfield said. "However, positive operating performance trends across the sector have developed in recent times and if, as expected, this continues, an increasing number of U.S. toll road credits could see outlooks revised upwards."
Fitch raised the ratings on E-470 Public Toll Road Authority's $1.55 billion of senior debt to BBB with a stable outlook from BBB-minus and a positive outlook in June in recognition of its strengthening financial profile in the growing Denver metropolitan area. A policy of annual toll increases with strong traffic growth has resulted in a doubling of the system's toll revenues since 2004 on E-470.
The 47-mile limited access toll road around the eastern perimeter of Denver serves thousands of commuters that work in downtown, and the numbers increase every year. "The rapidly increasing population highlights E-470's importance in serving daily commuters," Fitch noted in its upgrade.
The ratings on $1.5 billion of outstanding toll revenue bonds issued by Miami-Dade County Expressway Authority received an upgrade to A from A-minus from Fitch in June.
The Florida system shifted to all-electronic tolling in 2015, pushing the number of toll points to 16 from the previous three. As a result, Fitch said, toll transactions zoomed past $350 million in fiscal 2015, up from $244 million in 2014, and revenue was up by 35%.
Debt restructuring raised Fitch's ratings on two toll road issuers, San Joaquin Hills Transportation Corridor Agency in Orange and Riverside counties, Calif., and the Central Texas Turnpike System, which operates several toll roads in the Austin area.
The rating on the southern California system's outstanding debt was raised to BBB-minus from BB with a $1.1 billion restructuring in late 2014, while new junior lien debt totaling $294 million was also issued and rated BB-plus.
Fitch upgraded the $1 billion of outstanding debt issued by the Texas Transportation Commission on behalf of the Central Texas system in February to A-minus from BBB-plus and moved the outlook to stable from positive.
A TTC refunding later that month that included $451 million of senior-lien bonds and $1.16 billion of second-lien debt rated at BBB refinanced most of the debt issued by the state on behalf of the Austin-area turnpike system. The refunding resulted in economic savings of 22% and reduced the agency's annual debt service by 36%, or $154 million per year.
Toll roads have been stable-positive since 2011 and that will continue in 2016, Fitch said earlier this month in its transportation sector outlook.
Traffic on toll roads in 2015 is up 6.5% from 2014, and revenues are up 8.6%, the report said.
The need for new highway capacity in already congested urban corridors will spur the development of tolled managed express lanes in 2016 rather than new toll road projects, Fitch said.
