The Foothill/Eastern Transportation Corridor Agency (F/ETCA) has successfully refinanced $2.3 billion in outstanding debt originally issued in 1999. The deal attracted national attention as one of the largest fixed-rate municipal transactions of 2013.
"This is great news for Southern California drivers," said Lisa Bartlett, F/ETCA Chairwoman and Mayor of the City of Dana Point. "The refinancing enhances the agency's financial position so that we can concentrate on providing and improving mobility. We've lowered annual debt payments, which will provide pricing flexibility and cash flow for important projects."
Traffic and revenue on the F/ETCA's 36-mile toll road network - comprised of State Routes 133, 241 and 261 in Orange County, Calif. - have been growing with Orange County's regional economic recovery. For the first five months of the fiscal year (July thru Dec.), traffic has increased two percent and revenue is up seven percent, compared to the same period the year before.
"The bond refinancing reduces debt payments by $975 million between now and 2040 and will create a flexible financing structure. The restructuring of the debt keeps the agency in a very strong financial position and allows The Tolls Roads to continue to provide a valuable choice for Orange County residents and commuters," said Patricia Bates, F/ETCA Vice Chairwoman and Orange County Fifth District Supervisor.
The refinancing extends F/ETCA debt from 2040 to 2053, lowers annual payments through 2040 and reduces maximum annual debt payment by 24 percent. The bonds are being structured with various call dates and will be eligible for early redemption with excess revenue if the agency's Board of Directors chooses to do so, thereby shortening the final maturity date and eliminating the need to make additional interest payments.
"The restructuring brings the agency's debt in line with current revenue projections and strengthens our financial outlook," said Amy Potter, CFO of the Transportation Corridor Agencies (TCA). "The Board of Directors had authorized up to a 6.5 percent interest rate for the bonds, and the final result was 6.06 percent. The annual growth rate for the bonds has been reduced from 4.2 percent to 3.75 percent and the peak debt service has been reduced by $74 million."
In October, the F/ETCA Board of Directors approved the refinancing of outstanding bonds and amendments to a cooperative agreement between the F/ETCA and Caltrans that allows tolls to be collected through 2053. The following month, the F/ETCA received investment grade ratings from Standard & Poor's and Fitch Ratings on its update to the proposed refinancing of the 1999 bonds. With two ratings, the agency was able to move forward with the refinancing.
Standard and Poor's noted that revenues have responded well to recent toll increases, that the willingness to increase tolls by management is a positive credit factor and that the restructuring plan reduces maximum annual debt service by $30 million (actual reduction is $72 million). Fitch Ratings acknowledged that extending the debt by 13 years provides a more stable financial profile and that a history of pro-active decisions by management to raise rates is a credit strength.
"The 133, 241 and 261 Toll Roads provide a valuable link to the population centers in the Southern California region - which is the second largest metropolitan area in the country. It's a link to a burgeoning economic and employment center that is located in Orange County," said Neil Peterson, TCA's CEO. "We are providing a valuable and affordable service to the people who are coming in and out of Orange County to get to those jobs. Our board has a 13-year history of stepping up to the plate and meeting their financial obligations.Our toll revenues and our transactions have recovered strongly from The Great Recession and in the last three years have seen a steady increase.The refinancing provides cash flow savings to us between now and 2040, reduces the increase of our debt service requirements, lowers our maximum annual debt service, allows us a greater margin to exceed our coverage requirements of net toll revenues going forward."
"The experience that we offer our customers is a choice of a predictable trip that saves time and stress," said Peterson. "The F/ETCA Board of Directors, finance team and staff are commended for the work they have put into making this refinancing a reality."
The Foothill/Eastern Transportation Corridor Agency (F/ETCA) (is a public agency governed by local elected officials responsible for the planning, financing, construction and operations of State Route 133, 241 and 261. For the most recent fiscal year, F/ETCA transactional toll revenues were up seven percent, total operating revenues were $129.4 million and 56,173,061 transactions were recorded on the roads.
The Transportation Corridor Agencies (TCA) are two joint powers authorities (the San Joaquin Hills Transportation Corridor Agency and F/ETCA) formed by the California legislature in 1986 to plan, finance, construct and operate Orange County's 67-mile public toll road system. Fifty-one miles of the system are complete, including the 73, 133, 241 and 261 Toll Roads. Elected officials from surrounding cities and county supervisorial districts are appointed to serve on each agency's board of directors.
The Toll Roads Media Relations
Sarah Swensson King
Media Relations Manager