Moody’s Keeps Tollway Rating
The financially beleaguered San Joaquin Hills tollway got a bit of good news Thursday when a Wall Street firm maintained its investment-level grade rating for almost $1.8 billion in bonds sold to build the controversial turnpike.
Moody’s Investors Service, based in New York, declined to lower its Baa3 rating, its lowest investment grade, to speculative status, the designation used for so-called junk bonds that have the highest risks for investors. Another firm had reduced its rating on the bonds to junk status earlier in the week.
Analysts for Moody’s said strong management by the toll road’s operators and the possibility of refinancing the road’s debt outweighed the fact that traffic and revenues continue to fall short of projections by at least 20%. Moody’s also cited a $12-million federal line of credit that could be tapped to pay interest on the bonds.
“Since 1997, they have been keenly aware of the problem of [debt] coverage and have indicated that the ultimate solution would be a restructuring of the debt,” analysts wrote in their ratings report.
The San Joaquin Hills toll road, which runs from San Juan Capistrano to Newport Beach, is part of a 51-mile network of tollways operated by the Orange County Transportation Corridor Agencies. The other roads are the Foothill and Eastern tollways, along with a short stretch of Highway 133.
“This is very positive,” said Walter D. Kreutzen, chief executive of the corridor agencies. “We’re happy a national ratings agency has maintained its investment grade rating for the San Joaquin Hills.”
Moody’s is one of three ratings services that evaluate the bonds sold by the Transportation Corridor Agencies to build its tollway system. The others are Standard & Poor’s and Fitch Ratings, which have been steadily lowering their ratings of San Joaquin Hills bonds over the past several years.
On Tuesday, Fitch reduced its investment grade rating for the toll road to speculative grade.
Analysts for that firm said the road has continually failed to meet projections and the gulf appears to be widening between actual and forecasted revenues.
Two years ago, Fitch downgraded the road’s BBB rating to BBB-minus, the service’s lowest investment grade.
Standard & Poor’s also downgraded the corridor’s bonds to the lowest investment grade when the road was refinanced in 1997.
In February 2000, the service changed its financial outlook on the tollway from stable to negative. Standard & Poor’s has yet to review its last bond rating.
