The Rating Outlook is Stable for all bonds.
KEY RATING DRIVERS
--Multi-Segment System in Strong Service Area: CTTS captures a diverse user base encompassing both commuter and long-distance traffic. While
--Traffic Inelastic to Recent Toll Increases: Significant toll increases of 25%-50% on each segment (except SH 45SE) implemented in
--New Infrastructure with Pledged Operations & Maintenance: The project has only been fully open since 2008 so significant major maintenance work is not scheduled until 2027-28. The system undergoes annual inspections conducted by TxMAP, and scores achieved to date reflect the age of the infrastructure. Additionally, the
--Back-Loaded Debt Structure Dependent on Growth: The current accreted value of capital appreciation bonds (CABs) make up 32.65% of CTTS' current total outstanding debt and, as such, CTTS is dependent on continued revenue growth to meet an escalating debt service schedule. First-tier debt service from 2014, until maximum annual debt service (MADS) in 2037, grows at a compounded annual rate of 7.15%. No additional near-term future borrowing is expected and provisions exist to prevent the fully subordinated Transportation Infrastructure Finance and Innovation Act (TIFIA) loan from springing to first-tier status. Debt Structure: Midrange
--Ample Coverage and Liquidity Support: The system's debt service coverage ratio (DSCR) has been high for the rating category, at least 1.79x since 2009. Fiscal 2013 first-tier leverage (incorporating current accreted value of CABs), is slightly above average relative to peers at 13.1x, while first-tier MADS coverage is 0.62x. It is Fitch's view that, while dependent on growth, there is sufficient coverage cushion and strong liquidity support via fully funded debt service reserve and rate stabilization funds to weather stresses to the system.
--Sustained traffic and revenue growth that demonstrate an increasing ability to support operating and lifecycle costs with toll revenues and a material improvement in MADS coverage above the current 0.62x level, coupled with a material improvement in pay-by-mail collection rates, would be viewed positively.
--Conversely, volatile traffic and/or revenue performance, or a failure to improve pay-by-mail collection rates, could put negative pressure on the rating.
The first-tier bonds are secured by a gross lien on revenues of the system. The covenant by the TTC, which governs the
Fitch recognizes the system's growing financial self-sufficiency. In August and
Reflecting continued ramp-up, since 2008 total traffic across the system has grown at a compound annual growth rate (CAGR) of 9.2% while toll revenues have grown at a CAGR of 16.3%. The system's first toll increase occurred
First-tier DSCR in FY2013 was 3.02x while FY2014 DSCR is expected to be higher at 3.08x due to additional ramp-up and increased toll revenues. First-tier debt service rises annually from approximately
With the implementation of AET, pay-by-mail transactions in FY2013 grew to 26% of total transactions (from 20% in FY2012). Along with this increase, the PBM collection rate decreased to 45% from 55%. However, there are several on-going efforts underway to improve the PBM collection rate including new collection and back-office processing contracts with Xerox Corporation, and marketing efforts to influence PBM customers to use TxTag transponders. Additionally, the number of active TxTags increased 15% during FY2013.
The bonds are issued by TTC, acting as conduit for the
Additional information is available at 'www.fitchratings.com'.
--'Rating Criteria for Infrastructure and Project Finance', (
--'Rating Criteria for Toll Roads, Bridges and Tunnels', (
Rating Criteria for Toll Roads, Bridges and Tunnels
Rating Criteria for Infrastructure and Project Finance
Saavan Gatfield, +1-212-908-0542
Source: Fitch Ratings
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