The Rating Outlook on all bonds is Stable.
The 'AA' and 'A+' senior and junior ratings reflect
The junior lien is subject to more lenient covenants and is intended to be used for non-turnpike purposes. However, it compares favorably to peers on debt service coverage metrics, supporting its rating at the top of the 'A' category. The primarily cash funded capital plan and OTIC's intent to accelerate replacement of the roadway base provide further strength to the rating. Fitch expects that the debt service coverage ratio (DSCR) will be maintained at levels above 2.5x on the senior lien and 1.7x on the junior lien.
KEY RATING DRIVERS
--Strategic Asset with Low Volatility:
--Strong Rate-Making Flexibility: OTIC has unlimited toll rate-setting authority and this, coupled with low passenger toll rates of
--Cash Funded Capital Plan: OTIC's capital investment plan (CIP) is approximately
--Conservative Capital Structure: All of OTIC's debt is fixed rate and total debt service is relatively flat. That said, junior lien debt is somewhat back-loaded and, by definition, is fully subordinated behind the senior lien. Financial covenants are viewed as adequate and OTIC has adopted a policy to maintain a 2.0x debt service coverage ratio on the senior lien. Debt Structure: Stronger (senior lien); Midrange (junior lien)
--Modest Leverage and Robust Metrics: OTIC leverage of 1.9x on the senior lien and 8.5x on the junior lien in fiscal year (FY) 2013 reflects its well-managed debt profile. It is expected to maintain a DSCR profile of 2.5x or greater on the senior lien and 1.7x on the junior lien. Current liquidity is healthy, reflected in 567 days' cash on hand.
--Additional Leverage: Should senior debt be raised for non-system purposes, or meaningful additional junior debt be raised in excess of the aggregate
--Expanded O&M Scope: Additional operation and maintenance responsibilities relating to projects other than the turnpike itself;
--Declining Operating Performance: Cost growth or traffic declines resulting in senior or junior DSCR below 2.5x or 1.7x, respectively, for a sustained period.
The bonds are secured by the net revenues collected on the turnpike operated by the OTIC.
Total year-to-date traffic through
OTIC has historically produced consistently sound financial results. In FY2013, total debt service coverage was 2.43x. Maximum annual debt service (MADS) on the senior lien occurs this year and MADS coverage with FY2013 net revenue is very strong at 2.8x. Due to the accreting nature of a portion of the junior lien debt, total leverage approaches 9.0x with MADS occurring in FY2034, resulting in total current MADS coverage of 1.17x.
OTIC's CIP through 2023 totals
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 Infrastructure and Project Finance
Rating Criteria for Toll Roads, Bridges and Tunnels
Source: Fitch Ratings
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