Approximately $ 530 Million of Debt Securities Affected.
New York, September 22, 2021 -- Moody's Investors Service, ("Moody's") has
assigned an A1 rating to East End Crossing Partners LLC's planned
$530 million issuance of amortizing private activity refunding
bonds (Ohio River Bridges East End Crossing Project), Series 2021
(Green Bonds). The bonds will be issued by the Indiana Finance
Authority and on-lend to East End Crossing Partners LLC through
a senior loan agreement. The outlook for East End Crossing Partners
LLC is stable.
RATINGS RATIONALE
The A1 rating reflects the availability-based payment nature of
the project with a highly rated offtaker, a lower risk profile during
the 35-year operating phase, experienced sponsors,
a good operating track record with minimal deductions, and an expected
average DSCR of 1.4x throughout the debt amortization period beginning
in 2031.
Moody's positively recognizes the sponsors' experience (Vinci
and BBGI) and track record of effectively operating similar projects as
well as our belief that the sponsors have a long-term interest
in the project.
The monthly availability payment is adjusted each year by a weighted average
of the CPI (20% of MAP) and a fixed rate of 2.5%
(80% of MAP). Debt service is the major cost factor while
annual O&M costs are a small portion of the availability payment,
as such sensitivity cases are relatively resilient to changes in O&M
and lifecycle costs.
Appropriation risk is present but mitigated by the Aaa rating of the State
of Indiana (Aa1 appropriation backed bonds), the existence of annual
toll revenue that reduces the need for appropriated revenue, as
well as the good operating performance since construction completion in
2016 and final acceptance was reached in 2017. The project structure
is a typical availability payment structure but is uniquely constrained
by the appropriation risk given the state of Indiana's biennium
budgets do not allow for long-term debt obligations to be incurred.
The Indiana Finance Authority (IFA) and the Indiana DOT (INDOT) have entered
into the Milestone Payment Agreement and the Master Use Agreement,
which governs the operating availability payments to the project.
These agreements automatically renew every two years unless either IFA
or INDOT give six-month notice to terminate before the end of the
two-year term. Under both agreements, INDOT must request
that the state appropriate to INDOT the amount requested by IFA for the
Project for the next two years, given the state's two-year
budget cycle.
The toll revenues are required, per the Bi-State agreement,
to be sufficient to pay the following year's maximum availability
payment and other related costs. Owing to the receipt of availability
payments, project company's operating revenue was not impacted
by COVID-19 and resulting lower toll revenue since March 2020.
Other credit considerations include the back-loaded amortization
profile with amortization only starting December 2031, allowing
for high distributions in the next few years but mitigated by the escalation
of availability payments each year (80% at a fixed rate of 2.5%,
20% at CPI).
Liquidity is adequate with a 6-month DSRA and certain rehabilitation
and handback reserve requirements. A 1.1x lock-up
debt service coverage ratio (DSCR) restricted payment test provides modest
additional protection to lenders.
The rating recognizes the existence of the various project agreements
which place restriction on business activities and indebtedness for East
End Crossing Partners LLC as well as the agreements between the sponsors
as strong governance documents which support credit quality. Collectively,
Moody's views these agreements as governance under its ESG framework.
OUTLOOK
The stable outlook incorporates our expectation that the project will
generate an average DSCR of 1.4x throughout the debt amortization
period, an average DSCR of 1.7x during the life of the project
and will operate with minimal deductions.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING
FACTORS THAT COULD LEAD TO AN UPGRADE
• Debt service coverage ratio above 1.4x on a sustained basis
due to lower operating costs
• Extension of operating track record with minimal deductions
FACTORS THAT COULD LEAD TO A DOWNGRADE
• The relationship between project company and the project parties
materially deteriorates
• Higher appropriation risk and the rating of the State of Indiana
deteriorates by more than one notch
• Debt service coverage ratio falls below 1.2x on a sustained
basis
STRUCTURAL CONSIDERATIONS
Proceeds from the transaction will be placed in an escrow account and
will be used to legally defease the Series 2013 private activity bonds
that had been issued for this project at initial financial close.
The Series 2021 will be the only debt outstanding going forward.
The Series 2021 bonds will amortize until 2050 and debt service not begin
to amortize until 2031 allowing for higher distributions in the first
10 years and artificially high DSCRs during this period before returning
to an average DSCR of 1.4x.
Bondholders will benefit from a six-months debt service reserve
account requirement, certain lifecycle cost reserve requirements
and a 5-year handback reserve requirement under the project agreement,
and a distribution lock-up covenant of 1.1x DSCR.
Security consists mainly of the project company's interest in the
project revenues, the public-private agreement and all other
assigned agreements, and project accounts including the debt service
reserve account.
PROFILE
East End Crossing Partners LLC is an availability-based public-private-partnership
project of a cable stayed East End Bridge facility across the Ohio River
and associated roadway, tunnels and facilities, connecting
Clark County, Indiana and Jefferson County, Kentucky.
The project is a component of the larger Ohio River Bridges Project.
Construction on the project commenced on December 27, 2012 and ended
with Substantial Completion on December 17, 2016. Final Acceptance
was achieved on April 18, 2017.
Sponsors include BBGI Global Infrastructure S.A. (BBGI,
66.7%) and VINCI through VINCI Highways (33.3%).
METHODOLOGY
The principal methodology used in this rating was Operational Privately
Financed Public Infrastructure (PFI/PPP/P3) Projects Methodology published
in June 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1244911.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Kathrin Heitmann
VP - Senior Credit Officer
Project Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
A.J. Sabatelle
Associate Managing Director
Project Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
