Fitch Ratings affirms the outstanding 'A' long-term rating and assigns a
'F1' short-term rating to the Orange County Transportation Authority, CA
(OCTA) series 2003-B-1 and series 2003-B-2 (Series 2003B) toll road
revenue refunding bonds (91 Express Lanes). Fitch also affirms the
long-term rating on $79.3 million series 2003-A bonds. The Rating
Outlook is Stable.
On Dec. 10, 2008, OCTA intends to remarket all of the variable rate
series 2003B bonds with the Orange County Treasurer as purchaser. This
remarketing follows the recent expiration of the standby bond purchase
agreement by JP Morgan Chase Bank and Dexia Credit Local. The interest
rate will be set at 3.85% for a two-year period and, while Orange County
(the County) holds the bonds under this rate mode, there will be no
remarketing agent of liquidity provider requirement.
The bonds are subject to mandatory redemption on Dec. 9, 2010. However,
the County Treasurer is permitted a $100 million, one-time optional put
in December 2009 and, if exercised, OCTA will be able to purchase the
bonds from either remarketing proceeds or from any legally available
OCTA funds. The County's optional put requires a minimum 90-day
notification period. Fitch believes that the advance notice period for
the tender together with expected sufficient available balances of
high-grade and liquid cash and investment assets from OCTA's
unencumbered operating funds from other agency activities such as the
Measure M program will provide sufficient ability to cover a potential
liquidity event for the series 2003B bonds. As of Sept. 30, 2008, OCTA
maintained over $1 billion of investment assets, of which more than 70%
are invested in relatively liquid treasury securities, federal agency
securities, or money market funds. Further, OCTA has developed internal
procedures and timetables to ensure its investments can be available to
trustee ahead of the optional tender date.
The 'A' long-term rating affirmation reflects the continued favorable
history of strong financial performance and building sizable reserves;
an established traffic demand for the SR-91 corridor, particularly for
peak-period travel; minimal dependence on traffic and revenue growth to
meet outstanding debt obligations; demonstrated track record of adhering
to current toll policy that permits relatively frequent toll adjustments
based on specific hourly traffic activity; and a closed senior lien with
relatively modest debt levels.
The rating also reflects risks that include traffic and toll revenue
levels that are demonstratively sensitive to both volatile fuel prices
and economic activity as noted by recent declining traffic trends in
parallel with the economic downturns in the Orange and Riverside County
region; anticipated expansion of untolled general-purpose lane capacity
along SR-91 corridor through 2015 that may reduce financial flexibility;
and exposure to higher interest rates when the bonds reset or are taken
out; and an unhedged swap with counterparty performance issues.
