NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigns a long-term rating of AA- with a Stable Outlook to the Pennsylvania Turnpike Commission Turnpike Revenue Bonds, Series A of 2021. KBRA additionally affirms the long-term of AA- with a Stable Outlook for the Commission’s outstanding Turnpike Revenue Bonds. Lastly, KBRA affirms the long-term rating of A+ with a Negative Outlook for the Commission’s outstanding Turnpike Subordinate Revenue Bonds. KBRA first revised the outlook on the Turnpike Subordinate Revenue Bonds to negative from stable on April 13, 2020 reflecting the adverse impact of the COVID-19 pandemic and related public health measures on utilization and debt service coverage.
Key Credit Considerations
KBRA continues to monitor the direct and indirect impacts of the COVID-19 virus. Click here to access KBRA’s ongoing research on the topic. The rating actions reflect the following key credit considerations:
- The Pennsylvania Turnpike System is a highly essential statewide, regional toll road system with limited competition.
- PTC has full rate setting autonomy. Prudent financial management and controls have resulted in improving operating margins. The Commission rapidly implemented a slate of significant operating and capital cost reductions and revenue enhancers to address COVID-19 related revenue declines.
- Liquidity is ample.
- Traffic and toll revenues are susceptible to a recurrence of the COVID-19 crisis or other exogenous event.
- The Commission’s O&M, capital and existing debt obligations, including its remaining Act 44/89 obligations are substantial and require annual toll increases, the cumulative effect of which may at some point dampen traffic demand, reducing operating margins and financial flexibility.
- The planned long-term issuance of $2.25 billion in additional senior and subordinate debt ($1.3 billion senior and $950 million subordinate), including significant issuance in FY 2022, may strain subordinate lien coverage if actual traffic demand is materially weaker than forecast.
- A sustained trend of increasing net revenue resulting in debt service coverages well in excess of PTC’s targets of 2.0x annual debt service on senior lien, 1.30x combined senior and subordinate debt service and 1.20x for all three liens.
- A sustained decline in net revenue DSCRs below PTC’s targets for all liens.
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