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17 Jul 2015
The rating outlook is positive
New York, July 17, 2015 -- Moody's Investors Service maintains a rating of Aa3 to the remarketed
Series 2012B-1 Toll Road Senior Lien Revenue Refunding bonds of
Harris County. The bonds carry a positive outlook.
SUMMARY RATING RATIONALE
The rating is based on strong traffic and revenue growth supported by
a growing service area economy and annually indexed toll rate increases
that provide strong debt service coverage ratios (DSCRs) for both revenue
and tax-supported toll road debt and maintenance of strong liquidity
levels despite annual transfers of approximately $120 million to
the county's mobility fund for road projects that are not tolled.
No additional borrowing is planned, though we note that the county
is currently updating its capital improvement program. We note
the county expects to fund projects primarily with sizeable excess cash
flow, though bonds may be issued if larger projects are undertaken.
We note as a credit positive management's stated goal of keeping leverage
below five times gross operating revenues
The outlook for the toll road senior lien revenue bonds is positive based
on strong expected growth in traffic due to service area expansion combined
with demonstrated and expected on-going toll rate adjustments and
limited expected debt for capital projects. Moody's expects that
traffic growth and revenues will continue to produce strong DSCRs on a
net basis while the toll road system generates and maintains ample cash
margins. We also expect no increase in the current level of transfers
to the county to support non-toll road projects.
WHAT COULD MAKE THE RATING GO UP
- Increased traffic and revenues which further improve net DSCRs
- Increased unrestricted cash and liquidity
- Prudent implementation of capital plans without significant additional
WHAT COULD MAKE THE RATING GO DOWN
- Declines in traffic and revenues due either to a downturn in
the economy or failure to implement toll increases that erode debt service
coverage margins, reserves and financial margins
- Significant additional debt that raises the debt to operating
ratio above four times that is not supported by additional toll revenue
- Increased transfers for non-toll road purposes that erode
strong cash position
The Harris County Toll Road Authority system consists of approximately
120 miles of roadway in the Houston / Harris County metropolitan area
and 12 miles in Ft. Bend County, for a total of 132 miles.
The senior lien revenue bonds are special obligations of the county,
secured by a first lien on the trust estate established under the revenue
bond indenture, which includes a gross pledge of funds in the debt
service and debt service reserve fund (DSRF) and all revenues of the toll
road system. The rate covenant requires toll revenue collection
sufficient to produce revenues that provide at least 1.25 times
aggregate debt-service coverage on toll road senior lien revenue
bonds accruing in such fiscal year. The senior lien DSRF is to
be funded at not less than average annual aggregate debt service and not
more than maximum annual debt service.
USE OF PROCEEDS
The bonds are a remarketing of the Subseries 2012B-1 SIFMA bonds
with a par value of $109,500,000. The remarketed
bonds are expected to have a mandatory tender on August 15, 2018
and a final maturity of August 15, 2021.
Like the prior 2012B-1 SIFMA bonds that they replace (which have
a mandatory put date of August 15, 2015), if the bonds cannot
be purchased by the mandatory purchase date, a delayed remarketing
period will begin with all applicable series 2012B-1 bonds bearing
a stepped rate of interest. There is no acceleration or default.
- The rate will step up to SIFMA plus a spread for the first 90
days, and SIFMA plus a larger spread for the next 90 days,
after which the maximum rate would apply.
- The actual step rate margins and maximum rate are subject to
market conditions at pricing, but right now are anticipated to be
no larger than the 2012 issue (2.5% spread over SIFMA for
the first 90 days, 5.00% spread over SIFMA for the
second 90 days, and a 12% maximum rate).
- Though the currently expected mandatory put date is August 15,
2018 the county will have a window, starting February 15,
2018, during which the bonds can be optionally redeemed at par plus
accrued interest, so that the county will have a 6-month
window to access the market. This is the same structure as the
current 2012B-1 bonds.
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.
Please see Moody's Rating Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the meaning of each rating category and the definition of default and
Please see Moody's Ratings Symbols and Definitions on the Rating
Process page on www.moodys.com for further information on
the time horizon in which a credit rating action may be after a review
or outlook action took place.
Please see ratings tab on the issuer page on www.moodys.com
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on which some ratings were first released goes back to a time before Moody's
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Consequently, Moody's provides a date that it believes is
the most reliable and accurate based on the information that is available
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for the most updated credit rating action information and rating history.
Senior Vice President
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Chee Mee Hu
MD - Project Finance
Public Finance Group
Moody's maintains Aa3 to the remarketed Series 2012B-1 Toll Road Senior Lien Revenue Refunding bonds of Harris County
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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