News Column

Fitch Rates Miami-Dade Expressway Auth, Florida's Revs at 'A-'; Outlook Stable

September 4, 2014

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned an 'A-' rating to Miami-Dade County Expressway Authority, FL's (MDX) approximately $270 million 2014B series toll system revenue bonds and has affirmed the existing 'A-' rating on its approximately $1.54 billion outstanding toll system revenue bonds.

The Rating Outlook is Stable.

The 'A-' rating reflects the essentiality of the MDX system to commuters in the Miami area, coupled with a demonstrated willingness and ability to implement toll increases. The system benefits from historically stable traffic and revenue performance coupled with a proven ability to manage expenses and cut costs during non-expansionary years. After a large expected expense increase in the next fiscal year (FY; ended June 30) due to implementation of open road tolling (ORT) initiatives, Fitch believes MDX management will prudently maintain costs at an appropriate level.

KEY RATING DRIVERS

Stable Commuter Base With Strategic Importance - Volume Risk: Stronger

The MDX system has a mature traffic profile of over 237 million annual toll transactions and is a critical link to the Miami-Dade transportation network. Limited alternative routes enhance the importance of the system to the region. Transactions are expected to increase substantially in the next few years as open road tolling (ORT) is implemented on all expressways by FY 2015. FY 2014 traffic increased 2.9%, but revenues declined 6.5% due to toll collection related issues which were expected. The revenue number excludes $2.2 million in delayed of billings from the transition of vendors and MDX expects the billing process to be current within the next 30 days. The addition of this revenue makes FY 2014 revenue down only 4.9%.

Moderate Price Flexibility - Price Risk: Midrange

MDX currently has moderate toll rates with solid economic rate-making ability. The system focuses on the future tolling of untolled traffic to provide additional revenue. MDX adopted a toll policy in which tolls will be indexed to the consumer price index (CPI) beginning in FY 2018. Nevertheless, there are inherent political risks associated with toll increases especially if economic conditions deteriorate.

Good Physical Condition of Assets - Infrastructure Development & Renewal: Stronger

MDX has maintained the system and its facilities in excellent condition. MDX's FY 2015-FY 2019 work program is moderate at $879.2 million with no additional debt planned.

Some Exposure to Variable-Rate Debt - Debt Structure: Stronger (Revised from Midrange)

After the Series 2014B transaction, MDX's debt portfolio will be reduced to 8% in variable-rate mode with minimal interest rate risk exposure in a swap contract that matches the underlying debt in terms of notional balance and amortization. The overall debt service profile is moderately escalating and the debt service reserve is cash funded at maximum annual debt service (MADS).

Moderate Leverage and Healthy Financial Metrics

FY 2013 net debt to cash flow available for debt service (CFADS) was 8.7x and is consistent with peer facilities. Debt service coverage has historically been above 1.5x. FY 2013 debt service coverage increased to 1.56x from 1.37x in FY 2012 due to higher than anticipated net toll revenues and a substantial decline in operating and maintenance (O&M) costs attributable to a release of prior years' accrual of costs related to an on-going litigation with a vendor.

Peer Analysis

In comparison to peers in Fitch's portfolio, MDX functions closest to Orlando-Orange County Expressway Authority (OOCEA, 'A', Outlook Stable) with a politically sensitive pricing environment but a strong volume profile. OOCEA benefits from a healthier debt service coverage ratio above 1.9x due to higher tolls.

RATING SENSITIVITIES

Negative - Reduction in Financial Flexibility: Limited future financial flexibility upon completion of systemwide ORT, including previously untolled traffic movements or other factors that materially erode DSCR below 1.4x for three to five years, may lead to negative rating action.

Positive - Improved Operating Results: Management's ability to prudently contain O&M expense growth and pass-through costs (indirect expenses) associated with open road tolling (ORT) while proactively maintaining service levels and successful delivery of MDX's large-scale capital program, along with timely toll increases that enhance financial flexibility, resulting in debt service coverage ratios (DSCRs) above 1.60x, would reflect improved credit quality.

TRANSACTION SUMMARY

MDX is issuing approximately $270 million of series 2014B toll system revenue bonds and using up to $9.5 million of cash to refinance $160 million of the outstanding $241 million series 2005 variable rate bonds into fixed rate mode, pay the associated swap termination payments and refund $105 million of the outstanding $229 million series 2006 revenue bonds for savings.

The series 2005A-E variable rate bonds are privately placed with Dexia ('A', Negative Outlook) with three swaps of $80.5 million each with Citibank ('A', Stable Outlook), UBS AG ('A', Stable Outlook) and JP Morgan ('A+', Stable Outlook). The series 2014B transaction will terminate the corresponding swaps with Citibank and UBS, triggering termination payments of approximately $17.3 million each. The bonds will be fixed rate with a shortened amortization of 13.5 years from 20 years.

The series 2006 revenue bonds will be refunded for net present value savings of $5.4 million, or 4.9% of refunded par.

For more information, please see Fitch's press release 'Fitch Affirms Miami-Dade Expressway Auth, FL's Revs at 'A-''; dated April 24, 2014 and available at 'www.fitchratings.com'.

SECURITY

The bonds are secured by a pledge of and lien on the net revenues of the authority.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012);

--'Rating Criteria for Toll Roads, Bridges, and Tunnels' (Aug. 20, 2014).

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=758708

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=865414

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

Primary Analyst

Daniel Adelman

Analyst

+1-212-368-2082

Fitch Ratings, Inc.

70 West Madison Street

Chicago, IL 60602

or

Secondary Analyst

Chad Lewis

Senior Director

+1-212-908-0886

or

Committee Chairperson

Scott Zuchorski

Senior Director

+1-212-908-0659

or

Media Relations

Elizabeth Fogerty, +1-212-908-0526

elizabeth.fogerty@fitchratings.com


Source: Fitch Ratings


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