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Fitch Rates Triborough Bridge & Tunnel Auth (NY) Gen Revs & BANs 'AA-'/'A+'; Outlook Stable

January 21, 2014

NEW YORK --(BUSINESS WIRE)-- Fitch Ratings has assigned the following long-term underlying ratings to the Triborough Bridge and Tunnel Authority, New York's (TBTA) bonds: -- $250 million general revenue bonds, series 2014A 'AA-'; -- $100 million general revenue bond anticipation notes, series 2014A 'A+'. In addition, Fitch has affirmed the following underlying, long-term ratings for the TBTA: -- $6.7 billion outstanding general revenue bonds at 'AA-'; -- $1.8 billion outstanding subordinate revenue bonds at 'A+'. The Rating Outlook is Stable for all bonds. KEY RATING DRIVERS --CRITICAL ASSET: The bridge and tunnel system provides critical transportation links in the New York metropolitan area and is important to the economy of the greater New York region. Revenue Risk Volume: Stronger. --DEMONSTRATED TOLL INCREASES: The system has a mature and stable traffic base with historically strong ratemaking flexibility. While toll rates are high, traffic has remained relatively inelastic to TBTA's frequent increases. Revenue Risk Price: Stronger. --LARGE CAPITAL PROGRAM: TBTA has a large, mostly debt-funded capital reinvestment program that is focused on state of good repair. Infrastructure Development /Renewal Risk: Midrange. --SUBORDINATION OF MTA TRANSFERS PROTECTS BONDHOLDERS: Structural subordination of transfers (ranging from $315 million-$528 million since 2004) to Metropolitan Transportation Authority (MTA) for operations enhances bondholder protection by ensuring high senior and combined debt service coverage ratios. Debt Structure Risk: Midrange (senior lien); Midrange (subordinate lien). --HEALTHY FINANCIAL METRICS REFLECT MODERATE LEVERAGE: TBTA has experienced strong levels of financial flexibility demonstrated by its robust debt service coverage ratio (DSCR, 2.5x on the senior lien and 1.9x on a combined basis in 2012), albeit this is lower than historically achieved. Senior leverage is relatively low at 5.4x net debt-to-cash flow available for debt service. However, total leverage of 6.9x is moderate. RATING SENSITIVITIES --DSCRs on the general revenue bonds (senior lien) meaningfully below 2.0x or below 1.8x on both the senior and subordinate liens for a sustained period; --Lower than anticipated revenue yields from biennial planned toll increases or higher than anticipated expense growth; --Significant reduction in reserve levels with no expectation of replenishment; --Increased leverage or indication of deferred maintenance to sustain continued MTA transfers. SECURITY The general revenue and subordinate revenue bonds are secured by the net revenues collected on the bridges and tunnels operated by TBTA. TRANSACTION SUMMARY The proceeds of the series 2014A general revenue bonds and BANs will be used to finance projects for the TBTA system. Interest on the series 2014A BANs will be paid semi-annually from subordinated cash flow on a parity basis with existing subordinate lien debt, so the risk of default is the same as that of the subordinate lien debt. The maturity of the BANs is expected to be May 1, 2015 . TBTA is authorized to repay the BANs with (i) proceeds of any other TBTA BANS; (ii) proceeds of any TBTA bonds (senior lien bonds); and proceeds of other notes, debt or any other lawful amounts that MTA, in its discretion, elects to use to repay the TBTA BANs. The total authorization amount for the BANs is $500 million but this 2014A issuance is only $100 million and TBTA does not expect to issue all $500 million . If takeout is not successful, it will be a default on the BANs but not a defined event of default in any resolution. BANs are not TBTA bonds so they are not on parity with each other and once the BANS are taken out, they are retired. A default on any other TBTA obligation does not cause a default on the series 2014A BANs. Actual toll revenue for 2012 was $1.491 billion , higher than projected by TBTA's independent engineer, Stantec Consulting Services, Inc. (Stantec), and fell less than 1% year-on-year. Results for the first 11 months of 2013 indicate toll revenue is up 10.4% over the same period in 2012. Given the March 2013 toll increase, Stantec estimates toll revenue growth of 9.4% for the full year 2013 to $1.632 billion . Meanwhile, year-to-date traffic is flat while Stantec projects a year-on-year decline of 2.3 in 2013. Since 2003, TBTA has implemented fare and toll rate increases six times, most recently in March 2013 (delayed from January 2013 ). Traffic has proven inelastic to these increases, with a negative compound annual growth rate of just 0.56% from 2003-2012. As detailed in the November Financial Plan, the TBTA has proposed changing its biennial toll increases to achieve a lower revenue yield of 4% instead of 7.5%. The next toll increases are scheduled for 2015 and 2017. TBTA operates nine tolled facilities within New York City , consisting of seven bridges and two tunnels. These are the Verrazano-Narrows, RFK (formerly Triborough), Bronx - Whitestone , Throgs Neck, Henry Hudson , Marine-Parkway-Gil Hodges Memorial, and Cross Bay Veterans Memorial Bridges and the Queens Midtown and Brooklyn-Battery Tunnels. The Verrazano Bridge is the only facility on which tolls are collected in one direction only (round-trip tolls collected only in westbound ( Staten-Island ) direction). One recent TBTA initiative is the pilot project on the Henry Hudson Bridge to test all electronic toll (AET) collection operations. The implementation of cashless tolling at the facility began on Nov. 10, 2012 . For the year to September, 94% of weekday crossings were E-ZPass and 6% were toll-by-mail transactions. Thus far, both the readable photo image rate and the revenue collection rate are near 100%. Additional information is available at ' www.fitchratings.com '. Applicable Criteria and Related Research : --'Rating Criteria for Infrastructure and Project Finance' ( July 11, 2012 ); --'Rating Criteria for Toll Roads, Bridges, and Tunnels' ( Oct. 16, 2013 ). Applicable Criteria and Related Research : Rating Criteria for Infrastructure and Project Finance http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867 Rating Criteria for Toll Roads, Bridges and Tunnels http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720736 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=816050 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS . IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE ' WWW.FITCHRATINGS.COM '. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Ratings Media Relations Elizabeth Fogerty , New York , +1-212-908-0526 elizabeth.fogerty@fitchratings.com or Primary Analyst Chad Lewis , +1-212-908-0886 Senior Director Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 or Secondary Analyst Emari Wydick , +1-312-606-2308 Analytical Consultant or Committee Chairperson Saavan Gatfield, +1-212-908-0542 Senior Director Source: Fitch Ratings Fitch Ratings


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