7/14/2023 0 Comments Octa freeway express![]() ![]() It is part of the broader 405 Project on the San Diego Freeway (I-405) between SR-73 and I-605, a 16-mile corridor that passes through, or adjacent to, the cities of Costa Mesa, Fountain Valley, Huntington Beach, Westminster, Garden Grove, Seal Beach, Long Beach, and the community of Rossmoor. The project has a Debt Service Reserve Fund that will be cash funded from toll revenues, beginning three years after substantial completion and equal to the debt service due over the next twelve months.Subordinate debt requires consent from TIFIA and the TIFIA loan will be the only debt outstanding for the 405 EL and no other senior debt is allowed except for project completion bonds limited to 15% of the TIFIA loan or approximately $94 million.PROFILEThe 405 Express Lanes (EL) is a government owned toll road managed lane project undertaken by Orange County Transportation Authority (OCTA). The stable outlook also considers our view that traffic and revenue will ramp-up and grow in line with the issuer's base case forecast over the life of the TIFIA loan to produce financial metrics.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATING- The project's construction is completed on time and within budget- The 405 EL performs close to its base case forecast on a sustained basis once full ramp-up is completeFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATING- Material unmitigated delays demonstrating substantial issues impacting construction- Substantial increase in project costs allocated to the project- A longer than expected ramp-up period, traffic is notably lower than forecasted, or if the ELs begin to underperform our base case forecastLEGAL SECURITYThe TIFIA loan is secured by net toll revenues collected on the 405 EL and by funds reserved for payment of debt service. The increase is linked to DB change orders, costs linked to right of way and utilities, project support, construction related elements including tolling and third-party agreements and other approved costs outside the original budget.Additional credit weaknesses include an ascending debt structure and debt service reserve (DSRF) and major maintenance reserve funds that are expected to be funded from excess cash flow only after the project is operational.RATING OUTLOOKThe stable outlook reflects our expectation that the project will be completed without a material increase in schedule delays and both DBJV members will continue to execute construction as expected. The rating also considers the $180 million increase to project costs, to be funded by Measure M2 sales tax revenues. While the delay is substantial, it is mitigated by the TIFIA payment structure as debt service payments do not begin until five years after the project is operational, giving the project substantial flexibility. The project also benefits from relatively low leverage, strong legal covenants with no additional senior debt allowed except for project completion, and a government sponsor with extensive transportation capital planning and managed lanes experience.The rating also considers the delay of 295 days to the original Substantial Completion Date as of January 2021, in addition to the risks associated with design-build joint venture (DBJV) contractors of weaker credit quality and with relatively little experience working together in California. The forecasted demand is based on heavy congestion in the 72 -mile Interstate 405 (I-405) corridor, with reasonable traffic capture and revenue growth rate assumptions that support the rating. The asset fundamentals support the forecasted demand for the managed lanes over the medium-term and through loan maturity. The outlook is stable.RATINGS RATIONALEThe Baa2 rating reflects the fundamental strengths of this managed lane/express lane project, including its purpose as a congestion reliever in a densely populated, highly congested, primarily commuter corridor in a service area that is socioeconomically strong and growing. The commercial terms are expected to remain unchanged. OCTA's 2017 loan is expected to be cancelled with a new loan executed in April 2021 in order to reset the 2.91% interest rate closer to current market yields, resulting in lower debt service. Rating Action: Moody's assigns a Baa2 to the TIFIA Loan for Orange County Transportation Authority's (CA) 405 Express Lanes after loan rate reset outlook stableGlobal Credit Research - New York, Ap- Moody's Investors Service has assigned a Baa2 to Orange County Transportation Authority's (CA) (OCTA's) $628.93 million 2021 TIFIA (Transportation Infrastructure and Innovation Finance Act) Loan (405 Express Lanes) (EL's).
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