Fitch Ratings affirms the 'AA-' rating on approximately $5.56 billion of outstanding Bay Area Toll Authority (BATA), CA, senior toll bridge revenue bonds and variable-rate demand bonds (VRDBs). The Rating Outlook is Stable. BATA also has $2.39 billion in outstanding subordinate toll bridge revenue bonds which Fitch does not rate.
KEY RATING DRIVERS
CRITICAL ASSET: The seven-bridge system, with its long operating history and diverse and mature traffic base in an urbanized service area, provides a critical transportation link in the San Francisco Bay area and has resulted in a resilient traffic base.
MODERATE ECONOMIC RATE-MAKING FLEXIBILITY: The economic strength and near monopoly position provide management the ability to adjust rates to maintain a stable financial profile. The $6.00 peak hour toll is currently viewed as moderate for this type of facility, leaving room for further increases if needed.
HEALTHY FINANCIAL METRICS: Management has a policy to maintain $1 billion in cash and investments, and senior debt service is expected to be covered by at least 1.8x. However, total leverage including subordinate debt is moderate to high at 13x net debt-to-cash available for debt service (CFADS) with increasing debt service obligations through 2036.
VARIABLE-RATE DEBT/SWAP EXPOSURE: BATA's debt structure includes $1.5B in variable rate bonds of which approximately 15% is synthetically fixed through the use of various interest rate swaps.
MANAGEABLE CAPITAL PROGRAM: BATA has made significant progress towards the completion of its seismic retrofit projects with the east span of the San Francisco-Oakland Bay Bridge set to open to traffic in September 2013. Fitch expects the project to be completed within current projections.
WHAT COULD TRIGGER A RATING ACTION
--Changes in BATA's current traffic levels resulting in material improvement or weakness in financial performance;
--Management actions that increase total leverage without corresponding toll increase which changes BATA's financial metrics could result in rating pressure;
--Material deleveraging of the project could result in positive rating action.
Security:
The senior bonds are secured by a statutory lien on bridge toll revenues, subject to category B operation, and maintenance expenditures associated with toll collection and bridge lighting.
CREDIT UPDATE:
Preliminary fiscal 2012 data indicate that toll revenues were up 4.8% to $625.9 million and toll paying transactions were up 1.1% to 121.1 million. These results would be largely consistent with expected performance. Financial data for fiscal 2011 indicate that toll revenues were up 28.2% to $597.4 million. This follows a decline of 1% in fiscal 2010. The increase in revenue is primarily driven by a toll increase of $1 on two-axle vehicles and the implementation of a $2.50 toll on HOV vehicles during peak periods. Toll increase for vehicles with three or more axles will be phased in over two years beginning in fiscal 2012. Toll-paying traffic increased 6.9% in fiscal 2011 to 119.8 million, in large part due to the implementation of tolling for HOV vehicles. Excluding the implementation of HOV tolling, traffic increased 1.5%. Fiscal 2011 was the first year traffic increased since 2004. These results are emblematic of a mature asset with rate-making flexibility. Recent declines in traffic volumes were a result of macro-level economic issues in the Bay Area.
BATA has made significant progress towards meeting critical milestones in implementing its capital improvement program. The majority of the Seismic Retrofit Program projects have been completed except for the replacement of the east span of the San Francisco-Oakland Bay Bridge (SFOBB), which is in progress. The Seismic Retrofit Program also includes work on the Dumbarton Bridge which is currently underway and expected to be completed in 2013. The SFOBB is on budget and expected to be completed in September 2013.
Debt service coverage for the senior bonds in fiscal 2011 was approximately 1.8x, up from approximately 1.7x in fiscal 2010 and consistent with Fitch's base case projections. The increase in subordinate debt resulted in total coverage of approximately 1.2x in fiscal 2011, down from 1.3x in fiscal 2010. Fitch expects BATA will meet all of its obligations including Metropolitan Transportation Commission transfers and projected rehabilitation expenses in the near term but may face some pressure in the medium term without additional toll increases.
BATA is a public agency created by California law in 1997 to manage seven of the eight major bridge crossings in the Bay Area - the eighth being the Golden Gate Bridge which is managed by a separate entity. These bridges provide the only viable vehicular links within the Bay Area. The governing body consists of 16 voting members and three non-voting members appointed for a term of four years. BATA has the same governing board members as the Metropolitan Transportation Commission that was created in 1970 to provide regional transportation planning and organization in the Bay Area.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
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 Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867
Rating Criteria for Toll Roads, Bridges, and Tunnels
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684146
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