Research: Rating Action: Moody’s Upgrades Private Activity Bond (PAB) and TIFIA Loan Ratings of Blueridge Transportation Group, LLC to Baa2 from Baa3; stable outlook

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New York, July 12, 2022 — Moody’s Investors Service, (“Moody’s”) has downgraded the ratings of the senior secured revenue bonds of Blueridge Transportation Group, LLC (the Concessionaire or Project Co) from Baa3 to Baa2. $273 million (Blueridge Transportation Group, LLC SH 288 Toll Lanes Project) Series 2016 (Tax-Exempt) issued by Texas Private Activity Bond Surface Transportation Corporation as an intermediate issuer and a subordinated loan of $396.8 million under the Transportation Infrastructure Finance and Innovation Act (TIFIA). The outlook is stable.

Updates :

..Issuer: Blueridge Transportation Group, LLC

…. Subordinated bank credit facility, upgrade from Baa2 to Baa3

..Issuer: Texas PAB Surface Transportation Corporation

….Senior Secured Revenue Bonds, Upgrades to Baa2 from Baa3

Outlook Actions:

..Issuer: Blueridge Transportation Group, LLC

….Outlook remains stable

RATINGS RATIONALE

Today’s rating action reflects stronger-than-expected traffic and revenue performance since managed lanes opened on November 9, 2020, which will result in stronger-than-expected financial metrics and resilience initially. The upgrade also reflects the resolution of outstanding latent defects with the contractor and our expectation that final acceptance will occur in the short term.

The senior and subordinated secured ratings reflect the strong long-term cash flow generation potential supported by the surrounding strong economic service area and the project’s central location which allows it to capitalize on the growing congestion in the region. The stronger forecast traffic and revenue profile will now result in higher forward financial metrics over the life of the debt and has already resulted in the prepayment of capitalized interest on the TIFIA loan. This early redemption satisfies one of TIFIA’s conditions for share distributions, which may occur sooner than initially expected. We now expect some or all of the TIFIA loan to be refinanced by 2025 and the outstanding senior bonds are expected to be refinanced when repayable in 2026, depending on market conditions at that time. . While this may reduce some payment flexibility, total annual debt service coverage ratios (DSCRs) are expected to remain elevated beyond 2.0x under multiple rollover and downside scenarios. In addition, the long concession term of 12 years provides flexibility for refinancing and extending debt or adding new debt while maintaining DSCRs and lifetime coverage ratios of the concession (CLCR) solid. The rating also incorporates the project’s strong financing characteristics, liquidity requirements, limits on additional debt and generally positive TIFIA loan covenants and conditions which include a flexible repayment schedule.

The Senior Secured Bonds and the TIFIA Subordinated Loan are of equal credit quality due to the “jurisdictional lien” provision for the TIFIA Loan if a “bankruptcy event” occurs.

OUTLOOK

The stable outlook reflects our expectation that traffic and revenue will continue to grow in line with revised guidance with total DSCRs of all mandatory and scheduled debt service obligations between 2.0x and 3.0x and CLCRs above at 3.0x until a 2025 debt refinance happens.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

FACTORS THAT MAY LEAD TO UPGRADE

• According to Moody’s forecast, the total annual debt service coverage of all mandatory and scheduled debt service obligations exceeds 3.0x over the life of the debt

• Projected annual CLCR exceeds 4.0 x

FACTORS THAT MAY LEAD TO A DOWNGRADE

• According to Moody’s forecast, the total annual debt service coverage of all mandatory and scheduled debt service obligations falls below 2.0x over the life of the debt

• Expected annual CLCR falls below 3.0 x

PROFILE

Blueridge Transportation Group, LLC (Project Co or Concessionaire) is a special purpose entity that has been awarded a 52-year concession by the Texas Department of Transportation (TxDOT) to design, build, finance, operate and maintain the Project, which consists primarily of a 10.3-mile managed lane facility along the SH 288 median from the SH 288/US 59 interchange to south of the Sam Houston Turnpike.

Dealership owners include ACS 288 Holdings, LLC (ACS, 21.62%), S&B 288 Holdings, LLC (S&B, 21.62%), InfraRed 288 LLC (InfraRed, 21.62%), Northleaf SH288, LLC (Northleaf , 18.03%), Clal Houston Road RH, LP and Clal Shoreland RH, LP (Clal, 12.11%) and Star America SH-288, LLC (Star, 5.00%).

MAIN METHODOLOGY

The main methodology used in these ratings was the Privately Managed Toll Roads Methodology published in December 2020 and available at https://ratings.moodys.com/api/rmc-documents/69546. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following information, if applicable to the jurisdiction: Ancillary services, Information to be provided to the rated entity, Information to be provided by the rated entity.

The ratings have been communicated to the rated entity or its designated agent(s) and issued without modification resulting from such communication.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement was issued by one of Moody’s affiliates outside the EU and is approved by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main. -le-Main 60322, Germany, in accordance with Article 4(3) of Regulation (EC) No 1060/2009 on credit rating agencies. Further information on the EU approval status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

John Medina
VP – Senior Credit Officer
Project Finance Group
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

A. J. Sabatelle
Associate General Manager
Project Finance Group
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

Release Office:
Moody’s Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
UNITED STATES
JOURNALISTS: 1 212 553 0376
Customer service: 1 212 553 1653

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