CHICAGO - The Illinois State Toll Highway Authority plans to sell $450 million of new money revenue bonds Wednesday for projects in its ongoing $12 billion, 15-year capital program.
Citi and Barclays Capital are co-senior managers with BMO Capital Markets and Ramirez & Co. Inc. as co-senior managers and another five firms rounding out the syndicate. Public Financial Management Inc. and Acacia Financial Group are advising the authority. Mayer Brown LLP is bond counsel.
The $12 billion Move Illinois program relies on another $4.15 billion of borrowing. Another $450 million in new money borrowing is planned for later this year to support the $1.4 billion 2014 capital budget.
To complete the larger capital program, the authority expects to sell about $1.7 billion between 2015 and 2016 and $2 billion tentatively through 2022, according to the offering statement. The remaining cost of the program is paid with toll revenues on a pay as you go basis.
"Move Illinois addresses renewal, repair, and improvement needs of the existing system for the next 15 years" and includes an expansion with a new interchange and western access to O'Hare international Airport, the authority's chief of finance Mike Colsch tells potential buyers in an online "roadshow" presentation posted with the deal's offering statement.
Colsch added that the tollway board has approved rate hikes necessary to finance the program and the projects allow some flexibility to manage the costs and schedule going forward.
The senior bonds mature between 2026 and 2039, according to the roadshow. The bonds are secured by the system's net revenues. The authority expects total revenues of $1 billion in 2014, with about $300 million budgeted for expenses.
All three rating agencies affirmed the authority's double-A-minus ratings and stable outlooks.
The authority operates 286 miles of toll highways in 12 counties in northern Illinois. The new long-term capital program was approved by the tollway board in 2011. Some of the projects planned in 2014 include continuing work to rebuild and widen an interstate, continuing construction on a new interchange, construction of the new Elgin O'Hare Western Access toll road, and systemwide roadway and bridge work and planning studies.
The program aims to reduce congestion and pollution, expand the more than 50-year-old system, improve roads, and create jobs and economic development. It is spending $8 billion for improvements to existing roads and $4 billion for new and expanded roadways.
To support the program, the board adopted a steep one-time 87% increase in passenger tolls that took effect in 2012 and a 60% increase in commercial vehicle tolls that will be phased in and then adjusted annually based on inflation in 2018.
The authority said it expects average annual traffic growth of about 1.5% in the coming years.
"The ratings reflect our view of the system's essentiality and strong financial risk profile," said Standard & Poor's analyst Adam Torres.
Rating agencies have described the authority's significant addition of debt to support both the capital program and additional debt service reserve funding, as well as managing a big program, as a challenge, but said they are offset by other positive factors.
Analysts also said traffic projections pose a risk as they could be impacted by the toll increases and forecast traffic growth is higher than its historic growth. A decline could pressure coverage ratios.
Moody's Investors Service said the "strong Aa3 rating and stable outlook continue to be supported by both implemented and approved future toll increases; the demonstrated recent track record of delivering large, complex capital programs within budget and without significant traffic diversion."
The credit also benefits from rapid debt amortization as required by Illinois statute; forecasted over two times debt service coverage ratios including all planned debt; maintenance of strong liquidity level and slightly better than forecasted financial results for fiscal 2013.
Strong liquidity helps mitigate above average exposure to variable rate debt which is currently at 27.7%. The authority has exposure to nine liquidity and credit providers and nine swap agreements with eight counterparties, according to tollway debt manager Bill O'Connell. The authority is not subject to any collateral posting requirements.
