New York, January 12, 2016 -- Issue: General Revenue Bonds, Series 2016A; Rating: Aa3; Sale Amount: $300,000,000; Expected Sale Date: 01-20-2016; Rating Description: Revenue: Government Enterprise
Summary Rating Rationale
Moody's Investor's Service assigned a Aa3 to the Triborough Bridge and Tunnel Authority's (TBTA) General Revenue Bonds, Series 2016A. The bonds will include $300 million of new debt for funding capital projects and an amount subject to market conditions for advanced refunding several series of outstanding bonds for interest rate savings. Moody's maintains a Aa3 rating on the TBTA's parity outstanding general revenue bonds and an A1 rating on the subordinate lien general revenue bonds. The outlook for all 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 both among the strongest of all toll road facilities. These strengths are tempered by the bond structure that transfers excess revenues to support the MTA transit operations and reduces liquidity directly available to bondholders. The potential additional debt for the 2015 to 2019 capital program could result in lower than currently forecasted debt service coverage ratios (DSCRs); however, the TBTA has historically managed its capital needs with reasonable and timely toll rate increases.
The VMIG 1 ratings are based on the ability of the authority to provide short term liquidity in the event of a failed remarketing either through a bank supported letter of credit or standby bond purchase agreement or, in some cases the issuer's own cash flow and liquidity. The 2000ABCD bonds are not subject to redemption or tender except at maturity.
The stable outlook incorporates our expectation of continued steady regional economic recovery, low elasticity and the implementation of another planned rate increase in 2017 to sustain strong debt service coverage ratios (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 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 for support of the 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 lower demand elasticity 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 ratios in excess of 6 times would place downward pressure 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.
Other Considerations; Mapping to the Grid
The rating factors identified in our Government Owned Toll Roads rating methodology using FY 2014 results suggest an A1 grid score outcome for the authority; which corresponds to the assigned subordinate rating of A1 but is one notch below the assigned senior lien rating of Aa3. The higher senior lien rating is primarily based on the unique construct of the TBTA and its relationship with the MTA and the State of New York. In addition, we believe the current scoring for historical traffic growth and capital needs may improve over the longer term.
The grid is a reference tool that can be used to approximate credit profiles in the toll road industry in most cases. However, the grid is a summary that does not include every rating consideration. Please see Government Owned Toll Roads rating methodology for more information about the limitations inherent to grids.
Use of Proceeds
The Series 2016A Bonds are being issued to finance bridge and tunnel projects and pay cost of issuance. The 2016A bonds are also expected to advance refund some the authority's outstanding bonds, but the specific series and amounts will be subject to market conditions.
Triborough Bridge and Tunnel Authority (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 commuter operations and finance capital projects.
The principal methodology used in this rating was Government Owned Toll Roads published in October 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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 rating action on the support provider and in relation to each particular 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.
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Moody's assigns Aa3 to Triborough Bridge & Tunnel Authority's (NY) Series 2016A General Revenue Bonds
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007