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26 Oct 2017
New York, October 26, 2017 -- Issue: General Revenue Refunding Bonds, Series 2017C; Rating: Aa3; Rating Type: Underlying LT; Sale Amount: $500,000,000; Expected Sale Date: 11/07/2017; Rating Description: Revenue: Government Enterprise;
Summary Rating Rationale
Moody's Investors Service has assigned a Aa3 rating to the Triborough Bridge and Tunnel Authority, NY's (TBTA or MTA Bridges and Tunnels) approximately $500.0 million General Revenue Refunding Bonds, Series 2017C. The 2017C bonds will refinance certain outstanding indebtedness issued by MTA Bridges and Tunnels to finance bridge and tunnel projects and the exact amounts and refunded series will not be determined until closer to the sale date. Moody's maintains a Aa3 rating on the TBTA's outstanding general revenue bonds totaling approximately $7.21 billion and an A1 rating on the subordinate lien general revenue bonds totaling $1.47 billion. We also maintain a short-term MIG1 rating on the Series 2017A Bond Anticipation Notes. The outlook on the long term ratings is stable.
The TBTA's Aa3 senior and A1 subordinate lien ratings are based on the essentially of its facilities to the NYC metropolitan region and strength of its financial metrics which are among the strongest of all toll road facilities. These strengths are tempered by the organizational structure that transfers excess revenues to support the MTA transit and commuter operations and reduces liquidity directly available to bondholders. The potential additional debt for the TBTA's 2015 to 2019 capital program could result in lower than previously forecasted debt service coverage ratios (DSCRs); however, the TBTA has historically managed its capital needs with reasonable and timely toll rate increases.
The short-term MIG 1 BAN rating on the Series 2017A notes is based on the TBTA's strong expected market access as a large, frequent issuer with strong long-term credit; its plan to issue take out bonds greater than 30 days in advance of the BAN maturity; good management planning around the take out process; and, in the event of an unlikely extended market disruption, internal liquidity balances that for the past three years have been enough to pay for the full amount. The pledge to pay principal and interest on the 2017A notes is only from proceeds of other notes, proceeds of the take out bonds, or subordinate lien revenues for the payment of interest on the notes and are not secured by any other funds, including the TBTA's cash balances onhand.
The stable outlook incorporates our expectation of continued steady regional economic growth, low traffic elasticity in response to toll rate increases and the implementation of another planned rate increase in 2019 to sustain strong DSCRs. The ratings reflect solid credit fundamentals and assume that the TBTA will continue to grow net revenues; prudently fund asset maintenance and support senior lien revenue DSCRs at or above the 1.75 times board adopted target and total DSCRs at or above 1.50 times.
Factors that Could Lead to an Upgrade
Sustained higher than historic growth in traffic and revenues that signals a shift in the importance of the TBTA's assets
Clarity on future long-term capital requirements for both the TBTA and MTA that allows overall debt metrics and DSCRs to improve over the long-term
Dedication of additional financial liquidity to support TBTA bondholders could have a positive impact on the credit
Factors that Could Lead to a Downgrade
Significant declines in traffic and revenue or demonstrated higher elasticity from toll rate increases on the facilities
Greater than currently expected borrowing for capital projects or increased reliance on TBTA surplus transfers by the MTA that pressures toll rates higher
Senior DSCRs persistently below 1.75 times and total coverage levels below 1.50 times as well as debt to operating revenue ratio in excess of 6 times would place downward presure on the ratings
Senior lien general revenue bonds secured by a first lien on net revenues of bridges and tunnels; subordinate lien by a second lien on net revenues. The bonds do not benefit from a debt service reserve fund. There is a rate covenant that requires net revenues to be maintained at 1.25x annual debt service for senior lien debt and a strong additional bonds test that requires net revenues to be 1.40 times debt service on outstanding and planned bonds if the bonds are not being issued to keep the facilities in good operating condition.
The pledge to pay principal and interest on the 2017A notes is only from proceeds of other notes, proceeds of the take out bonds, or subordinate lien revenues for the payment of interest on the notes.
Use of Proceeds
Proceeds from the General Revenue Refunding Bonds, Series 2017C will be used to refinance certain outstanding indebtedness issued by MTA Bridges and Tunnels and to finance bridge and tunnel projects.
TBTA, or MTA Bridges and Tunnels, is a public benefit corporation (a corporate entity separate and apart from the state) without any power of taxation. TBTA is empowered to construct and operate toll bridges and tunnels and other public facilities in New York City. The TBTA's facilities include: Robert F. Kennedy Bridge (formerly the Triborough Bridge), Verrazano-Narrows Bridge, Bronx-Whitestone Bridge, Throgs Neck Bridge, Henry Hudson Bridge, Marine Parkway-Gil Hodges Memorial Bridge, Cross Bay Veterans Memorial Bridge, Hugh L. Carey Tunnel (formerly the Brooklyn-Battery Tunnel), and the Queens Midtown Tunnel. MTA Bridges and Tunnels receives its revenues from all tolls, rates, fees, charges, rents, proceeds of use and occupancy insurance on any portion of its tunnels, bridges and other facilities, including the net revenues of the Battery Parking Garage, and bridges and tunnels' receipts from those sources. TBTA issues debt obligations to finance the capital costs of its facilities and the transit and commuter systems operated by other affiliates and subsidiaries of the Metropolitan Transportation Authority or MTA. TBTA's surplus amounts are used to fund transit and comuter operations and finance capital projects.
The principal methodology used in the long-term rating was Government Owned Toll Roads published in November 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
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