Fitch Affirms New Hampshire Turnpike System's $405MM Rev Bonds at 'A+'; Outlook Stable

NEW YORK--()--Fitch Ratings has affirmed its rating on $405 million of New Hampshire Turnpike System (NHTS) turnpike system revenue bonds issued by the state of New Hampshire at 'A+'. The Rating Outlook remains Stable.

Key Rating Drivers

Important Transportation Link: The mature service area and strong competitive position of the turnpike system supports a stable traffic and revenue base for several major New Hampshire population centers. Commercial vehicles represent 5.4% of total turnpike traffic and 17.6% of toll revenues but add some volatility to the system's traffic profile. Nevertheless, traffic has been relatively flat at approximately 108 million annual transactions since 2010.

Revenue Risk - Volume: Stronger

Moderate Rate Making Ability: Toll rates have been raised in recent years to maintain financial flexibility. The turnpike has considerable economic rate-making flexibility with an average toll of $1.07, which is comparable to other turnpike facilities in Fitch's rated portfolio, but faces some political challenges. The next toll increase will be contemplated in 2015.

Revenue Risk- Price: Midrange

Conservative Debt Structure: All outstanding bonds are fixed rate. The debt service schedule is declining, with annual payments of $39.8 million in FY 2014 decreasing to $27.1 million in FY 2021.

Debt Structure: Stronger

CIP Requires New Borrowing: NHTS is anticipating the issuance of $50 MM of additional bonds to fund the current capital plan in FY 2015. The new 2015-2024 capital plan totals $211 million and should be manageable without toll increases or additional debt. It is authorized to issue $102 million of additional debt, although it currently doesn't expect to need this full amount.

Infrastructure Development and Renewal: Midrange

Overall Financial Margins Remain Adequate: Debt service coverage ratio is strong at 2.05x in fiscal 2013. Net debt to cash flow available for debt service (CFADS) is moderate at 4.10x. Furthermore, the turnpike currently maintains $59.6 million of unrestricted cash, equivalent to 515 days cash on hand, providing considerable liquidity support.

Rating Sensitivities

--Future approval of interstate aggregation legislation that could undermine the turnpike's financial position by exacerbating capital expenditure requirements and placing a heavier reliance on future toll increases on the existing system.

Security:

The revenue bonds are secured by a net pledge of turnpike revenues.

Credit Update:

FY 2013 transactions are down 0.4% to 108.2 million, reflecting a continuation of the relatively flat traffic growth trend since the rate increase in 2009, and continuing into FY 2014.

Between FY 2008 and FY 2013, toll transactions on the NH Turnpike declined slightly at a CAGR of -0.89% as a result of toll increases and opening of the Manchester Access Road.

Revenues in 2013 decreased slightly by 1.04% as a result of higher percentage of EZ-Pass users, having been broadly flat in the previous two fiscal years. The state had originally planned a toll increase in 2012, but this was eventually deemed unnecessary.

Operating expenses have grown at a CAGR of 3.26% since FY 2006. Fluctuations in expenses are mainly attributed to winter weather conditions with FY 2013 expenses up 3.8% relative to a decrease of 1.2% in 2012. These swings are mainly attributable to costs associated with snow removal.

Debt service coverage ratios remain strong at 2.05x in 2013. Under Fitch's base case, which assumes an average of 1.3% traffic growth and 2.5% expense growth as well as $50 million of additional debt, coverage ratios are expected to remain above 1.6x. Fitch's rating case assumes two consecutive years of 2% declines, and coverage is expected to remain above 1.5x. Fitch would expect NHTS to raise rates if coverage dropped to levels in the rating case.

Segments of the NHTS began operations in 1950. The turnpike consists of the Central Turnpike and Eastern Turnpike. The Central Turnpike (also known as the F.E. Everett) is a 39.5-mile segment that extends from the Massachusetts state line to Nashua, NH through Manchester and up to Concord, the state capital. The Eastern Turnpike consists of the Blue Star Turnpike and Spaulding Turnpike segments. The Blue Star Turnpike is a 16-mile segment of U.S. Interstate 95 from the Massachusetts state line to Portsmouth, NH. The Spaulding Turnpike is a 33.2-mile segment extending from Portsmouth to Milton.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating Criteria for Infrastructure and Project Finance', July 12, 2012;

--'Rating Criteria for Toll Roads, Bridges, and Tunnels' Oct. 16, 2013.

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867

Rating Criteria for Toll Roads, Bridges and Tunnels

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720736

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=823560

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Contacts

Fitch Ratings
Primary Analyst
Raymond Wu, +1-212-908-0845
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Scott Zuchorski, +1-212-908-0659
Senior Director
or
Tertiary Analyst
Markian Dziuk, +1-312-368-3187
Analyst
or
Committee Chairperson
Saavan Gatfield, +1-212-908-0542
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Raymond Wu, +1-212-908-0845
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Scott Zuchorski, +1-212-908-0659
Senior Director
or
Tertiary Analyst
Markian Dziuk, +1-312-368-3187
Analyst
or
Committee Chairperson
Saavan Gatfield, +1-212-908-0542
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com