SH121 concession gets NTTA S&P bond rating down a notch & stuck on credit watch

North Texas Tollway Authority (NTTA) has had its bond rating downgraded because of concerns about the debt it's taking on to finance its concession agreement with TxDOT on SH121. Standard and Poor's (S&P) have lowered their rating on NTTA longterm bonds from A+ to A, a high rating still. But the NTTA will remain on "Creditwatch with negative implications until NTTA clarifies its longterm plan of finance," S&P say.

NTTA surprised analysts with their heavy reliance on short term bond anticipation notes (BANs) to meet their commitment to paying TxDOT the upfront concession fee of $3.33b. The BANs - $3.75b - have to be repaid by June 1, 2008.

An S&P statement says: "The rating downgrade, which affects roughly $1.345 billion in revenue bonds issued for the NTTA system, reflects the significant additional debt that the authority is incurring with this BAN issuance, which will almost triple the authority's total debt. The ratings remain on CreditWatch with negative implications until NTTA clarifies its long-term plan of finance. At closing, the authority may issue less than $3.75 billion in BANs but will not issue any more than $3.75 billion. Due to the strength of the authority's existing toll system, the rating could remain in the 'A' category, depending on the authority's exact financing plans and amortization schedule."

S&P analyst Laura Macdonald said the rater will monitor the status of the SH121 project and they expect to reevaluate their CreditWatch designation within the next 90 days.

In addition to funding the upfront concession fee of $3.33b has to find an estimated $640m for construction cost to complete the project. TxDOT has the project approximately half-built. In addition NTTA is obliged to progressively widen the main lanes from 6 to 8 2012 to 2015.

SH121 is a 42km (26 mile) tollroad trending northeast to southwest across the north of the Dallas area, and several miles north of the NTTA's President George Bush Turnpike. The NTTA concession is for 50 years. There are no contract limits on toll rates, so NTTA will be free to set them at profit maximizing levels - a favorable aspect of the concession for the local toll authority and its ratings.

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TOLLROADSnews 2007-11-15