Fitch Affirms Bay Area Toll Authority (CA) Senior Toll Bridge Revenue Bonds at 'AA-'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has today affirmed the 'AA-'rating on approximately $5.56 billion of outstanding Bay Area Toll Authority (BATA) senior toll bridge revenue bonds and variable-rate demand bonds (VRDBs). The Rating Outlook is Stable. BATA also has $2.39 billion in outstanding subordinate toll bridge revenue bonds which Fitch does not rate.

KEY RATING DRIVERS:

Relatively stable traffic profile: The seven bridge system's long operating history and diverse and mature traffic base in an urbanized service area provides a critical transportation link in the San Francisco Bay area and has resulted in a resilient traffic profile;

Moderate economic rate making flexibility: The economic strength and near monopoly position provide management the ability to adjust rates to maintain a stable financial profile. Although the authority has independent rate making flexibility no additional toll increases are expected in the medium term.

Solid financial metrics with moderate to high leverage and a back loaded debt structure: management has a policy to maintain $1 billion in cash and investments and senior debt service is expected to be covered by at least 1.8 times (x). However, total leverage is moderate to high at 12x net debt to cash available for debt service (CFADS) with increasing debt service obligations through 2030.

Reduced risk from swaps and liquidity facilities: BATA terminated $515 million of constant maturity swap options, decreased total swap portfolio by $337 million and replaced about $1.5 billion of liquidity facility agreements with direct pay letters of credit. The net result is a reduction in the risk profile of BATA's capital structure. Approximately 77% of BATA's debt is fixed-rate bonds and about 17% is synthetic fixed-rate bonds.

Solid progress in capital program development: BATA has made significant progress towards the completion of its seismic retrofit projects with the east span of the San Francisco-Oakland Bay Bridge set to open on Sept. 3, 2013. The project is reported to be on-budget.

WHAT COULD TRIGGER A RATING ACTION:

--Major delays and cost overruns on the seismic retrofit program could lead to ratings pressure if financial performance is adversely impacted as result.

--Significant or unanticipated change in BATA's current traffic levels resulting in material changes in financial performance.

--Considerable additional leverage resulting in a material changes in BATA's financial metrics.

SECURITY:

The senior bonds are secured by a statutory lien on bridge toll revenues, subject to category B operation and maintenance expenditures associated with toll collection and bridge lighting.

CREDIT UPDATE:

Financial data for fiscal year 2011 indicate that toll revenues were up 28.2% to $597.4 million. This follows a decline of 1% in fiscal year 2010. The increase in revenue is primarily driven by a toll increase of $1 on two-axle vehicles and the implementation of a $2.50 toll on HOV vehicles during peak periods. Toll increases for vehicles with three or more axles will be phased in over two years beginning in fiscal 2012. Toll-paying traffic increased 6.9% in fiscal year 2011 to 119.8 million, in large part due to the implementation of tolling for HOV vehicles. Excluding the implementation of HOV tolling traffic increased 1.5%. Fiscal 2011 was the first year traffic increased since 2004.

BATA has made significant progress towards meeting critical milestones in implementing it capital improvement program. The majority of the Seismic Retrofit Program projects have been completed except for the replacement of the east span of the San Francisco-Oakland Bay Bridge (SFOBB), which is in progress. The Seismic Retrofit Program also includes work on the Antioch Bridge and the Dumbarton Bridge which are both currently underway. The SFOBB is on budget and expected to be completed in September 2013. Work on the Antioch and Dumbarton Bridges is expected to be completed in 2012 and 2013 respectively with no major issues reported to date.

Debt service coverage for the senior bonds in fiscal 2011 was approximately 1.8x up from approximately 1.7x in fiscal 2010 and consistent with Fitch's base case projections. The increase in subordinate debt resulted in total coverage of approximately 1.2x in fiscal 2011 down from 1.3x in fiscal 2010. Fitch expects BATA will meet all of its obligations including Metropolitan Transportation Commission transfers and projected rehabilitation expenses in the near term but may face some pressure in the medium term without additional toll increases.

BATA is a public agency created by California law in 1997 to manage seven of the eight major bridge crossings in the Bay Area -- the eighth being the Golden Gate Bridge which is managed by a separate entity. These bridges provide the only viable vehicular links within the Bay Area. The governing body consists of 16 voting members and three non-voting members appointed for a term of four years. BATA has the same governing board members as the Metropolitan Transportation Commission that was created in 1970 to provide regional transportation planning and organization in the Bay Area.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Rating Criteria for Infrastructure and Project Finance,' (Aug. 16, 2011);

--'Rating Criteria for Toll Roads, Bridges, and Tunnels' (Aug. 5, 2011).

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648832

Rating Criteria for Toll Roads, Bridges, and Tunnels

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646421

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