IRVINE, Calif.--(BUSINESS WIRE)--The Foothill/Eastern Transportation Corridor Agency (F/ETCA), which manages and operates the 133, 241 and 261 Toll Roads in Orange County, Calif., today announced that it has received investment grade ratings from both Standard & Poor’s and Moody’s Investors Service on its proposed refinancing of outstanding debt issued in 1999.
- The refinancing is a good financial step that takes advantage of historically low interest rates to lower debt payments – similar to what many homeowners are doing right now by refinancing their homes.
- The investment grade rating and the refinancing of the bonds will allow for fewer and lower toll rate increases in the future.
- Lower toll rates mean less congestion on free alternatives and improved traffic circulation, which is important for regional mobility and recovery of the local economy.
“We are pleased with the results of the credit rating process. It proves that the plan to refinance the agency’s bonds is sound and that the rating agencies have confidence in the finances of the 241 Toll Road,” said Lisa Bartlett, chairwoman of the F/ETCA and mayor pro tem for the City of Dana Point. “Securing investment grade ratings on the proposed Senior 2013 Refunding Bonds validates the agency’s plan to take advantage of historically low interest rates and decrease annual debt service payments, all of which is good news for toll road drivers, regional mobility and the local economy.”
“I believe it is important to move forward with the refinancing of the 241 Toll Road’s bonds in order to lower interest rates and annual debt service payments, everyone benefits,” said State Senator Mimi Walters, representing the 37th District.
“I was on the Board of Directors when the opportunity to refinance the 241 Toll Road’s debt first came up. It made good business sense then and it makes good business sense now to lock in lower interest rates,” said Bill Campbell, former F/ETCA board member and Orange County Supervisor, California Assembly Member and business owner. “At the end of the day, we need to keep our transportation agencies financially strong because they are so critical to our economy.”
“The 241 Toll Road is vital to the city of Rancho Santa Margarita – our 50,000 residents use this toll road more than any other city in Southern California. The refinance plan has been well thought out by nationally recognized financial experts and vetted by experienced, proven leaders from all across Orange County committed to applying conservative fiscal policies to maintain the financial security of the Foothill/Eastern Transportation Corridor Agency. This refinancing provides TCA with increased flexibility and security to weather future economic downturns and enables the agency to provide better service for all toll road customers. That is great news for all residents of Southern California,” said Tony Beall, mayor of Rancho Santa Margarita.
“Thousands of families are refinancing their homes to take advantage of low interest rates. Lower mortgage payments give families a cushion to manage expenses and unknown events. Refinancing the toll road bonds is no different and makes perfect sense. I am glad to see the Foothill/Eastern Agency is planning to take advantage of low interest rates to reduced annual costs,” said Dennis O’Connor, board member, Orange County Association of Realtors.
“Keeping our transportation systems financially sound is important for Orange County’s economy and workforce,” said Jim Graham, general manager, Santa Margarita Ford. “The 241 Toll Road is critical to Santa Margarita Ford’s business model – not only for our customers, but also for our 90 employees and managing daily deliveries. Refinancing in today’s low interest rate environment is smart for any business. In the case of the 241 Toll Road it is good news for commuters and the community because toll rates will be more manageable.”
As announced in December 2012, the F/ETCA Board of Directors approved a staff recommendation to develop various financial structures to refinance existing F/ETCA bonds with the goals of achieving debt service savings, lowering annual debt service growth and increasing future flexibility.
Obtaining ratings from various rating agencies is one of the steps required to complete the refinancing. The F/ETCA Board of Directors will consider the refinance plan at its regular meeting on June 13, 2013. The refinancing plan to take advantage of historically low interest rates also requires that the State of California sign the previously negotiated 13-year term extension of the Caltrans cooperative agreement. A similar cooperative agreement extension was signed in 2011 for the 73 Toll Road. After these approvals, the plan is to access the market as soon as possible.
The $2.4 billion refinance plan will extend the debt from 2040 to 2053 by replacing existing bonds with new, lower interest rate bonds, lower annual payments and carry a lower annual debt service growth rate than the current debt structure. The difference in payments is expected to result in a positive present value savings because of lower interest rates and the new lower debt payment schedule, which equate to lower required toll rate increases resulting in more people using The Toll Roads, more relief of traffic on free routes, improved regional mobility, less congestion and a better local economy. The refinancing would strengthen the agency’s financial situation and provide flexibility to weather future economic downturns and improves cash flow.
Standard & Poor’s rated all senior lien bonds investment grade at “BBB-.” Moody’s Investor Service gave an investment grade rating of “Baa3 – Outlook Stable” to all of the senior lien bonds, which are the primary credit of the agency. Standard & Poor’s and Moody’s also issued ratings of “BB+” and “Ba1 – Outlook Stable,” respectively, on a small amount (approximately $200 million) of Junior Lien Refunding Bonds (Series 2013B) that F/ETCA may issue if market conditions are attractive and they provide a more cost effective and more flexible debt structure.
The agency is pleased with these ratings results and especially their stable outlooks. Investor interest in tax-exempt investment grade bonds is currently strong despite recent bond market volatility. In reviewing the agency’s proposed transaction, Moody’s cites a number of positive attributes of the transaction and agency credit strengths including: debt service smoothing and expenditure relief; and the agency’s history of proactive, almost-annual toll rate increases and increases in related fees. Moody’s report also lauds the agency for timely financial reporting and expresses the view that the agency will benefit from the expected continued recovery and development in the service area and the relief The Toll Roads provide from traffic congestion.
The refinancing could include approximately $1.4 billion of 2013 Series A, Senior Lien Toll Road Refunding Revenue Bonds, approximately $600 million of 2013 Series D, Senior Lien Forward Delivery Bonds and approximately $200 million of 2013 Series B, Junior Lien Toll Road Refunding Revenue Bonds, all of which will be tax-exempt bonds. In order to achieve the Board-established goals of the financing and ensure compliance with various federal regulations, the agency also is considering the issuance of a Tender Invitation relating to a portion of the outstanding Series 1999 Bonds to be refunded. Depending whether a tender occurs, the amount of 2013 Series D Forward Delivery Bonds will be reduced and the 2013 Series A, current delivery bonds will be increased. All these components remain subject to change based upon market conditions.
About F/ETCA
The Foothill/Eastern Transportation Corridor Agency is a public agency governed by local elected officials responsible for the planning, financing, construction and operations of 36 miles of roadway comprised of State Routes 133, 241 and 261. For the most recent fiscal year, F/ETCA transactional toll revenues were up seven percent, total operating revenues were $129.4 million and 56,173,061 transactions were recorded on the roads.
About TCA
The Foothill/Eastern Transportation Corridor Agency is a public agency governed by local elected officials responsible for the planning, financing, construction and operations of State Route 133, 241 and 261. For the most recent fiscal year, F/ETCA transactional toll revenues were up seven percent, total operating revenues were $129.4 million and 56,173,061 transactions were recorded on the roads. Public oversight ensures that the interests of local communities and drivers are served and that TCA continues to meet the region's growing need for congestion-free transportation alternatives.
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