Fitch Rates Triborough Bridge & Tunnel Authority's (New York) Revs 'F1+'

AUSTIN, Texas--()--Fitch Ratings has assigned an 'F1+' short-term rating to the Triborough Bridge and Tunnel Authority, New York's (TBTA) $27.9 million general revenue variable-rate refunding bonds, subseries 2005B-4a and $43.8 million general revenue variable-rate refunding bonds, subseries 2005B-4d.

Fitch has also affirmed the following ratings:

--$34.4 million outstanding subordinate revenue variable-rate refunding bonds, subseries 2000ABCD-2 at 'F1+';

--$36.6 million outstanding subordinate revenue variable-rate refunding bonds, subseries 2000ABCD-3 at 'F1+'.

In addition, Fitch has affirmed TBTA long-term ratings as follows:

--$7.04 billion outstanding general revenue bonds at 'AA-';

--$1.72 billion outstanding subordinate revenue bonds at 'A+'.

The Rating Outlook is Stable for all long-term ratings.

KEY RATING DRIVERS

The short-term ratings reflect the underlying rating for the TBTA's senior and subordinate revenue bonds coupled with Metropolitan Transportation Authority's (MTA)/ TBTA's historical demonstrated market access and ample available liquidity to cover short-term debt requirements.

The long-term ratings reflect the bridge and tunnel system's essentiality, performance, as well as a mature and stable traffic base with historically strong ratemaking flexibility. Offsetting concerns include the system's dependence on continued revenue growth to support annual transfers to the MTA for transit and commuter rail services. These transfers have left TBTA with lower liquidity and a dependence on future borrowing to fund a large part of its sizable capital plan. While the significant level of transfers to the MTA could be a risk, all resolution requirements of the authority's system are senior to this transfer.

Revenue Risk - Volume: Stronger

CRITICAL ASSETS: The bridge and tunnel system provides vital transportation links in the New York metropolitan area and is important to the regional economy, evidenced by its relatively stable historical traffic growth. As of 2014, traffic has grown at a 0.37% annual rate since 1970.

Revenue Risk - Price: Stronger

DEMONSTRATED TOLL INCREASES: The system has a mature and stable traffic base with historically strong ratemaking flexibility. While toll rates are elevated, traffic has remained relatively inelastic to TBTA's frequent increases. Between 2002 and 2014, TBTA has raised rates six times resulting in a 0.4% annual decline in traffic with a 5% CAGR in toll revenues.

Infrastructure Development/Renewal Risk: Midrange

LARGE DEBT-FUNDED CAPITAL PROGRAM: TBTA has a large, mostly debt-funded (79%) 2015 - 2019 capital reinvestment program totalling $2.9 billion that is focused on state of good repair and includes $570 million in pay-go funding. In addition to the proposed issuance, TBTA's current projections include nearly $1 billion in new money issuance through 2019.

Debt Structure Risk: Midrange (senior); Midrange (subordinate)

TRANSFER SUBORDINATION PROTECTS BONDHOLDERS: Structural subordination of transfers (ranging from $500 million - $630 million between 2012 - 2014) to MTA for operations ensure high senior and combined debt service coverage ratios (DSCRs). However, these transfers leave the authority short on liquidity support and reliant on additional debt to fund capital expenditures. The absence of cash-funded debt service reserves is a risk, partially mitigated by nearly $520 million of cash reserves in place as of August 2015. TBTA's aggregate revenues bonds are 80.8% fixed, 10% synthetically fixed, and 9.2% unhedged variable rate.

Financial Metrics: TBTA has strong financial flexibility as demonstrated by its robust DSCRs of 2.70x on the senior lien and 2.17x on a combined basis in 2014. Senior leverage is relatively low at around 5x net debt-to-cash flow available for debt service (CFADS), increasing to over 6.0x by 2018 if additional senior lien debt is issued. Total leverage of 6.4x is currently moderate and is expected to rise to over 7x with future issuances.

Peers: Bay Area Toll Authority (BATA; rated 'AA-'/Stable Outlook by Fitch) is TBTA's closest peer. BATA has higher consolidated leverage at over 12x compared to 6.6x for TBTA. However, BATA has a policy to maintain $1 billion in cash and investments, providing significant liquidity to the authority, while TBTA provides annual surplus transfers to MTA limiting its ability to build up reserves and making it more reliant on future toll increases.

RATING SENSITIVITIES

Negative: Lower than anticipated revenue yields from biennial planned toll increases or higher than anticipated expense growth. DSCRs on the general revenue bonds (senior lien) meaningfully below 2.0x or below 1.8x on a consolidated basis for a sustained period. Significant reduction in reserve levels with no expectation of replenishment.

Negative: Higher leverage than projected or an indication of maintenance being deferred to sustain continued MTA transfers.

Positive: Given the size of the issuer's capital program and its constrained liquidity, upward rating movement is not likely in the near term.

SUMMARY OF CREDIT

TBTA is remarketing $27.9 million subseries 2005B-4a and $43.8 million subseries 2005B-4d senior general revenue variable-rate refunding bonds. The subseries 2005B-4a and 2005B-4d are being remarketed as floating-rate tender notes with mandatory tenders of one year (December 2016) and three years (December 2018), respectively.

The bridge and tunnel system has a mature and stable traffic base with a 0.37% CAGR from 1970 through 2014. Traffic in 2014 was up 0.66% reaching 286 million, and while it was expected to decline 1% in 2015 as a result of a 4% toll increase implemented in March of this year, volume in the first eight months of the year through August was up 3.8% over the same period in 2014. Toll revenues grew in 2014 by 1.9% to $1.68 billion with 2015 toll revenues currently expected to increase by 5.5%, or 3.1% above budget, driven by stronger than projected traffic performance. Total costs are currently expected to increase by about 15%. Senior DSCRs are anticipated to remain strong, reaching 2.63x in 2015 compared to budgeted 2.50x and all-in DSCRs are forecast at 2.11x.

TBTA operates nine tolled facilities within NYC, consisting of seven bridges and two tunnels. These are the: Verrazano-Narrows (Staten Island-Brooklyn), RFK (formerly Triborough, Bronx-Queens-Manhattan), Bronx-Whitestone and Throgs Neck (both Bronx-Queens), Henry Hudson (Bronx-Manhattan), Marine-Parkway-Gil Hodges Memorial and Cross Bay Veterans Memorial Bridges (both Brooklyn-Queens); and the Queens Midtown (Queens-Manhattan) & Brooklyn-Battery Tunnels (Brooklyn-Manhattan). The Verrazano bridge is the only facility on which tolls are collected in one direction only, while the cash tolls for passenger cars on Marine Parkway & Cross Bay are half the level of those on the major facilities.

For more information on the TBTA, please see Fitch's press release 'Fitch Rates Triborough Bridge & Tunnel Authority's (New York) Rev Bonds 'AA-'; Outlook Stable' dated April 30, 2015, available at www.fitchratings.com.

SECURITY

The general revenue and subordinate revenue bonds are secured by the net revenues collected on the bridges and tunnels operated by TBTA.

Additional information is available on www.fitchratings.com

Applicable Criteria

Rating Criteria for Infrastructure and Project Finance (pub. 28 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870967

Rating Criteria for Toll Roads, Bridges and Tunnels (pub. 29 Sep 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=870170

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=993199

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=993199

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Tanya Langman
Director
+1-212-908-0716
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Chad Lewis
Senior Director
+1-212-908-0886
or
Committee Chairperson
Scott Zuchorski
Senior Director
+1-212-908-0659
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Tanya Langman
Director
+1-212-908-0716
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Chad Lewis
Senior Director
+1-212-908-0886
or
Committee Chairperson
Scott Zuchorski
Senior Director
+1-212-908-0659
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com