Fitch Rates Maine Turnpike Auth Rev Rfdg Bonds 'AA-' & Special Oblig. Bonds 'A-'; Outlook Stable
NEW YORK--(BUSINESS WIRE)--Fitch Ratings assigns an 'AA-' rating to Maine Turnpike Authority's (the authority or turnpike) $31.9 million series 2014 turnpike revenue refunding bonds and an 'A-'rating to $26.9 million series 2014 special obligation bonds. The bonds are expected to price on July 22, 2014. Fitch also affirms the 'AA-'rating on $396.4 million of outstanding revenue bonds and the 'A-' rating on $11 million of outstanding special obligation bonds.
The 'AA-' and 'A-' ratings reflect stable traffic performance on the turnpike. The toll rate increase in November 2012 of 28% provides strong coverage ratios and sufficient revenues for the authority to meet needed capital requirements over forthcoming years.
Key Rating Drivers:
Mature and Stable Asset: The Maine Turnpike is a mature asset and serves as the primary travel corridor through the southern portion of Maine. It also provides access for leisure travelers to the coastal areas, while serving as an essential artery for commercial vehicles. Commercial traffic represents approximately 10% of total traffic and 34% of total toll revenues. Traffic has historically remained stable, even through the most recent economic downturn - in 2008 and 2009 traffic decreased just 2.5% and 2.8% respectively. Since then, traffic has been relatively flat reflecting the impact of toll increases in 2009 and 2012.
Revenue Risk- Volume: Midrange
Demonstrated Rate-Making Ability: Toll rates are competitive by national standards. Management has demonstrated a willingness to increase revenues through periodic toll rate increases to ensure the funding of capital needs and to maintain financial flexibility. The most recent toll increase is expected to generate sufficient revenues to fund the bulk of the authority's long-term capital needs.
Revenue Risk- Price: Stronger
Conservative Debt Structure: All bonds outstanding are fixed rate and mature in 2042, and annual debt service requirements are declining. The authority does not have plans for additional new money debt after this issuance.
Debt Structure: Stronger
Manageable Capital Program: Management maintains the ability to fund a significant portion of capital needs on a pay-as-you-go basis and its 10-year capital program of approximately $502 million is manageable.
Infrastructure Development and Renewal: Stronger
Low Leverage and Strong Coverage: Overall financial metrics remain healthy - current leverage, defined as net debt to cash flow available for debt service (CFADS), is moderate at 4.2x, while debt service coverage ratios (DSCR) of 2.7x for the senior lien and 1.67x for the subordinate lien provide the authority with a strong financial cushion against downturn or extraordinary costs. The authority has $17.8 million of unrestricted cash, equivalent to 372 days cash on hand.
--Management's continued ability to maintain DSCRs above 2.0x are supportive of the current rating; if turnpike expense growth outpaces that of revenue and management allows financial margins to decline, credit quality could be negatively affected.
The turnpike revenue bonds are primarily secured by the net toll revenues of the MTA after the payment of operating expenses. The special obligation bonds are secured by a pledge of all special obligation revenues, which are defined as those monies which are transferred by the authority out of the Department of Transportation provision account into the general reserve fund and on deposit with the trustee pursuant to the special obligation resolution for the payment of debt service. Per the resolution, the authority has covenanted to maintain toll revenues at levels to ensure a transfer of amounts sufficient to pay debt service.
The authority expects to issue $31.9 million of turnpike revenue refunding bonds to redeem all callable 2004 bonds for debt service savings. Present value savings are currently estimated at $3.9 million or 10.4% of refunded par. The authority also expects to issue $26.8 million of special obligation bonds. Proceeds from the special obligation bonds will be used to purchase a 1.9-mile segment of the I-95 which connects the turnpike with New Hampshire from the Maine Department of Transportation (MaineDOT or the department).
Under the amended Enabling Act, the authority is to allocate 5% of its operating revenues, based on a three-year rolling average, to department projects that are jointly determined by the MTA and MaineDOT (currently at $5.7 million). Pursuant to the draft Purchase and Sales Agreement with the department, debt service payments relating to the bonds used to purchase the section of the I-95 will be credited towards the authority's obligation to department projects (approximately $1.3 to $2.5 million each year). In addition, $1 million per year will be credited towards department projects for the next 30 years in consideration of future rehabilitation and repairs for the segment of the interstate. The project along with debt service payments of the outstanding series 2008 special obligation will fulfill a large portion of the authority's annual requirement to department projects.
For more information please see the report 'Fitch affirms Maine Turnpike Authority Rev Bonds at 'AA-'; Outlook Stable'; dated April 4, 2014 and available at www.fitchratings.com.
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, Aug. 2, 2012.
Applicable Criteria and Related Research:
Rating Criteria for Toll Roads, Bridges and Tunnels
Rating Criteria for Infrastructure and Project Finance