The Louisiana Public Facilities Authority expects to price $1.33 billion in Baa3-rated toll bonds next week, in a public-private partnership to replace the Calcasieu River Bridge, but with the bonds backed by toll revenues, there remains some concerns about drivers using alternate routes to avoid the charge.
JPMorgan and Wells Fargo will manage the deal. Foley & Judell serves as bond counsel. Preliminary pricing on the bonds, which are subject to the alternative minimum tax, is scheduled for Tuesday.
The bonds are scheduled to have maturities in 2054, 2059, 2064, and 2066 and be callable at par in September 2034.
Calcasieu Bridge Partners is a joint venture of Plenary Americas US Holdings, Inc., which holds a 40% equity stake, and Sacyr Infrastructure USA LLC, and Acciona Concesiones S.L., each with a 30% stake.
The project is structured as a design-build-finance-operate-maintain and will tap toll revenue along with other funds to replace the existing bridge, which has been deemed structurally deficient by the National Bridge Inventory, and widen the interstate along a 5.5-mile corridor. The project will replace the main Calcasieu River bridge, widen two smaller bridges and lay down several miles of new highway and an off-ramp. The state and federal governments will also provide funds.
Moody's Ratings rates the bonds Baa3 rating, its lowest-investment grade rating, and assigns a stable outlook.
Calcasieu Bridge Partners "will bear the risk of toll collections being
"There have
"The Belle Chasse [Bridge] project [in Louisiana] seems to have built confidence in the P3 concept especially given the regional aversion to tolls in Louisiana," Krist said. "It doesn't hurt that residents get discounts as the primary users are trucks and tourists."
Since the Calcasieu P3 has "many of the same players" as the Belle Chasse "project, there should be some confidence about execution risk," Krist said. P3 partners learn with each project, he added. "With this and other projects occurring in the South and Southeast, the acceptance of tolling is a key to expanding the use of P3s in that region."
"I think that there will be plenty of attention on this deal from institutional investors," said Pat Luby, senior municipal strategist at CreditSights. "There are elements of the financing that to me, make them less appropriate for most individual investors. Specifically, the uncertainty of the construction period, and more importantly, the post-opening behavior of drivers. The toll rates used for the feasibility study seem reasonable, but with the alternate route across the rivers, if drivers don't see the value, the cash-flow projections could be challenged."
The bonds' being subject to the AMT is another concern, Luby said. "This year's [AMT] volume of $12.2 billion is very close to eclipsing last year's total of $16.4 billion. Demand for AMT is not as deep as it is for non-AMT. However, with the credit rating being low investment grade-and [being subject to the] AMT, spread on the deal should be attractive. I anticipate that even high-yield funds will take a hard look at the deal."
Plenary is also the partner on the state's first major transportation P3, the Belle Chasse Bridge and Tunnel replacement, a $170 million project approved in 2019, with $64.8 million in bonds used: $12 million GARVEEs and $52.8 million toll revenue bonds. The new bridge opened to traffic in June, with an automated tolling system that offers discounts to local residents.
Huval & Associates, Kapsch USA and Modjeski and Masters were involved in both projects.
The Calcasieu Bridge on Interstate 10 is the main interstate across the southern part of the country, running from Jacksonville, Florida, to Los Angeles. The bridge, in Lake Charles, Louisiana, is about 36 miles east of the border with Texas.
Drivers can use an untolled alternative on Interstate 210, which would add between three and six minutes to their travel time. According to the investor presentation, a study commissioned by the developer indicates most drivers will pay the toll rather than make the diversion.
The tolls will have more than 12 categories, varying from 25 cents for local drivers to $2.50 for non-local cars, to $8.25 for large truck drivers traveling at peak times with automatic vehicle identification transponder tags. Drivers of high occupancy vehicles will get lower rates. The project's agreement allows for toll increases based on inflation.
The I-10 bridge has a far greater share of heavy and medium trucks than does the I-210 bridge, according to the presentation.
High utilization by commercial trucks is one of the factors Moody's cited as a credit positive for the bonds.
For credit concerns Moody's mentioned "tolling risk since there is no history of tolling in the region. Historically, anti-tolling sentiment in the state has created political challenges which could arise in the future."
The rating also is affected by the department's "limited experience with long-term private partners for tolled facilities in the state, with this being the second project," Moody's said.
For positives, Moody's cited a $98 million ramp-up reserve to provide insurance against underperformance during the first 10 years of tolling, which it said was the riskiest period.
While construction could be delayed, the risk is "mostly mitigated by the long seven-year construction schedule."
The design-build contractor's security package is adequate in that it includes a performance bond at 50% of the contract price, parent company guarantees up to a limit of liability of 30% of the design-build contract price, and a letter of credit sized to cover 12 months of delay liquidated damages.
Calcasieu Bridge Partners will benefit from a $50 million reserve to back its cost-sharing in case of higher-than-expected inflation, Moody's said.
Moody's expects a debt service coverage ratio of at least 1.6 times from 2032 to 2066.
The developer in its investor presentation said 50,000 vehicles crossed the bridge in 2022. The sponsor's traffic and revenue report projects a 1.4% annual traffic increase while the lenders' traffic and revenue report projects a 0.8% annual traffic increase.
The developer will have operation and maintenance responsibilities for the facilities, with limits, from the date of partial acceptance expected in 2031 to the expiration of the comprehensive agreement in 2081.
