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Rating Action:

Moody's assigns Aa3 rating to Oklahoma Turnpike Authority's Second Senior Revenue Refunding Bonds Series 2020A and 2020B and affirms outstanding ratings; outlook stable

25 Sep 2020

New York, September 25, 2020 -- Moody's Investors Service has assigned a Aa3 rating to Oklahoma Turnpike Authority's $370 million Oklahoma Turnpike System Second Senior Revenue Refunding Bonds Series 2020A and 2020B (Federally Taxable). We have also affirmed the Aa3 rating on the authority's outstanding $1.75 billion of outstanding second senior revenue bonds. The outlook is stable.

RATINGS RATIONALE

The Aa3 rating is based on the well-established turnpike system that serves as an essential inter and intrastate connector and provides a source of stable revenue generation. Financial operations are well-managed and system assets are maintained in very good condition with required capital funding annually determined by an independent engineering consultant. Although some negative effects are expected, the authority is well positioned to recover from coronavirus disruptions. We expect the anticipated savings from the refunding will offset revenue declines driven by the coronavirus, and that revenues will continue recovering at a quicker pace compared with other Moody's rated toll road systems.

We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety. The coronavirus crisis is not a key driver for this rating action. We do not see any material immediate credit risks for OTA. However, the situation surrounding coronavirus is rapidly evolving and the longer term impact will depend on both the severity and duration of the crisis.

RATING OUTLOOK

The stable outlook is based on the expected maintenance of financial metrics through anticipated refunding savings and likely tepid traffic recovery. The authority is well positioned to withstand coronavirus-driven traffic declines using their ability to swiftly implement toll rate increases if needed and flexibility to manage future capital spending given the very good condition of system assets.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

- Sustained higher than anticipated traffic growth in the high single digits

- Revenue growth that provides total DSCR consistently above 3.0x

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

- Significant increases in capital requirements

- Total DSCRs below 1.5x on a net revenue basis

- Deterioration of liquidity position below 400 days cash on hand

LEGAL SECURITY

The bonds are secured by the net revenues of the toll road system and share of state Motor Fuel Tax (MFE) collected based on 97.5% of total gallons of fuel consumed on the authority's turnpikes, with 97% apportioned to Turnpike Trust Fund. The Turnpike Trust Fund, currently funded at $46.9 million, secures the bonds and can only be used to make debt service on outstanding bonds. All MFE taxes not needed to pay debt service are transferred to the Oklahoma Department of Transportation (ODOT) monthly. No MFE taxes have been used for debt service since the current law came into effect in 1992. Bonds are additionally protected by an additional bonds test that requires 1.20x historical DSCR or 1.05x prospective DSCR, plus reserve maintenance and a debt service reserve fund sized either 10% of original principal issuance or maximum annual debt service.

USE OF PROCEEDS

Proceeds of the Series 2020 Bonds will be used to refund all or a part of the Authority's outstanding Oklahoma Turnpike System (a) Refunding Second Senior Revenue Bonds, Series 2011A, (b) Second Senior Revenue Bonds Series 2011B, and (c) the 2029 through and including 2033 maturities of the Second Senior Revenue Bonds Series 2017C. The bonds are being refunded to realize a reduction in interest expense, with the Series 2011B and a portion of the Series 2011A refunded on a tax-exempt current basis, and the Series 2017C advance refunded and a portion of the Series 2011A current refunded on a taxable basis.

PROFILE

OTA is authorized to construct, maintain, repair and operate the turnpike system, which presently consists of ten turnpikes covering approximately 605 miles. The authority has the exclusive right to determine whether to construct a turnpike route, and the right to set toll rates with no executive or legislative branch approval required. OTA's board of directors consists of the governor, who is a member ex-officio, and six members. All members are appointed by the governor, by and with the consent for the State Senate. The governor may remove any member of the authority, at any time, with or without cause.

METHODOLOGY

The principal methodology used in these ratings was Publicly Managed Toll Roads and Parking Facilities published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1091602. 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are 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 https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

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.

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.

Julie Meyer
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
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Kurt Krummenacker
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Client Service: 1 212 553 1653

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No Related Data.
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