KBRA Assigns AA- Rating with Stable Outlook to Pennsylvania Turnpike Commission Turnpike Revenue Bonds, Series A of 2021

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:

Credit Positives

• 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.

Credit Challenges

• 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.

Rating Sensitivities

For Upgrade

• 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.

For Downgrade

• A sustained decline in net revenue DSCRs below PTC’s targets for all liens.

To access ratings and relevant documents, click here.

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Only those ratings on securities issued by this Issuer that also are denoted on the Security Ratings tab for this Issuer on KBRA.com as “endorsed” by Kroll Bond Rating Agency Europe Limited into the European Union and/or by Kroll Bond Rating Agency UK Limited into the UK are covered by the disclosures set forth in this press release and the corresponding Information Disclosure Form. No other ratings on issuances by this Issuer have been endorsed into the European Union or the UK, and the disclosures set forth herein and in the corresponding Information Disclosure Form are inapplicable to those ratings and may not be used for regulatory purposes by European Union or UK investors in these securities.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.