OREANDA-NEWS. Fitch Ratings has assigned an 'AA-' Long-term rating to the Triborough Bridge and Tunnel Authority, New York's (TBTA) \$250 million general revenue bonds series 2015A.

Additionally, Fitch has affirmed the following, long-term ratings for the TBTA:

--\$6.85 billion outstanding general revenue bonds at 'AA-';
--\$1.72 billion outstanding subordinate revenue bonds at 'A+'.

The Rating Outlook is Stable for all bonds.

The 'AA-' and 'A+' Long-term ratings reflect the essentiality and performance of the bridge and tunnel system that has a mature and relatively stable traffic base and demonstrated ratemaking flexibility. Offsetting concerns include the system's dependence on annual revenue growth to support annual transfers to the Metropolitan Transportation Authority (MTA) for transit and commuter rail services. These transfers have left TBTA with lower liquidity and a dependence on future borrowing to fund a large part of its sizable capital plan. While the significant level of transfers to the MTA could be a risk, all resolution requirements of the authority's system are senior to this transfer.

KEY RATING DRIVERS

Revenue Risk - Volume: Stronger
CRITICAL ASSETS: The bridge and tunnel system provides critical transportation links in the New York metropolitan area and is important to the regional economy, evidenced by its relatively stable historic traffic growth. Traffic has grown at a 0.37% annual rate since 1970.

Revenue Risk - Price: Stronger
DEMONSTRATED TOLL INCREASES: The system has a mature and stable traffic base with historically strong ratemaking flexibility. While toll rates are elevated, traffic has remained relatively inelastic to TBTA's frequent increases. Between 2002 and 2014, TBTA has raised rates six times resulting in a 0.4% annual decline in traffic with a 5% CAGR in toll revenues.

Infrastructure Development/Renewal Risk: Midrange
LARGE DEBT-FUNDED CAPITAL PROGRAM: TBTA has a large, mostly debt-funded (74%) capital reinvestment program totaling \$3.1 billion that is focused on state of good repair. In addition to the proposed issuance, TBTA's current projections include approximately \$1 billion in new money issuance through 2018.

Debt Structure Risk: Midrange (senior); Midrange (subordinate)
TRANSFER SUBORDINATION PROTECTS BONDHOLDERS: Structural subordination of transfers (ranging from \$500 - \$630 million between 2012 - 2014) to MTA for operations ensure high senior and combined debt service coverage ratios (DSCRs). However, these transfers leave the authority short on liquidity support and reliant on additional debt to fund capital expenditures. The absence of cash-funded debt service reserves is a risk, partially mitigated by more than \$460 million of cash reserves in place. TBTA's aggregate revenues bonds are 80.5% fixed, 10.2% synthetically fixed and 9.3% unhedged variable rate.

Financial Metrics: TBTA has strong financial flexibility as demonstrated by its robust DSCRs of 2.70x on the senior lien and 2.17x on a combined basis in 2014. Senior leverage is relatively low at 5.3x net debt-to-cash flow available for debt service (CFADS), increasing to over 6.0x by 2018 if additional senior lien debt is issued. Total leverage of 6.6x is currently moderate and would rise to 7.4x with future issuances.

Peers: Bay Area Toll Authority (BATA; rated 'AA-'/Stable Outlook) is TBTA's closest peer. BATA has a higher consolidated leverage at over 12x compared to 6.6x for TBTA; however, BATA has a policy to maintain \$1 billion in cash and investments, providing significant liquidity to the authority while TBTA provides annual surplus transfers to MTA limiting its ability to build up reserves and making it more reliant on future toll increases.

RATING SENSITIVITIES

Negative: DSCRs on the general revenue bonds (senior lien) meaningfully below 2.0x or below 1.8x on a consolidated basis for a sustained period.

Negative: Lower than anticipated revenue yields from biennial planned toll increases or higher than anticipated expense growth.

Negative: Significant reduction in reserve levels with no expectation of replenishment.

Negative: Higher leverage than projected or an indication of maintenance being deferred to sustain continued MTA transfers.

Positive: Given the size of the issuer's capital program and its constrained liquidity, upward rating movement is not likely in the near-term.

TRANSACTION SUMMARY

The proceeds of the \$250 million general revenue bonds series 2015A will be used to retire \$100 million of the series 2014A BANS (May 1, 2015 maturity) and finance various capital projects for TBTA. The bonds will be issued in a fixed rate mode, amortizing through 2045 and are expected to be the only new debt issued in 2015.

The bridge and tunnel system has a mature and stable traffic base with a 0.37% CAGR since 1970. Traffic in 2014 was up 0.66% reaching 286 million, expected to decline 1% in 2015 as a result of a 4% toll increase implemented in March of this year. Toll revenues grew in 2014, by 1.9% to \$1.68 billion following a 10.3% increase in 2013 as a result of the toll increase that year. The projected traffic decline in 2015 contributes to the modest toll revenue growth expectation of 2.4%. Traffic has proven inelastic to past rate increases, with annual declines of just 0.4% from 2002 - 2014. Conversely toll revenue has grown at a 5% CAGR over the same 12 year period.

Total operating expenses grew at a 2.2% CAGR from 2009-2014 comparing favourably to the 4.7% toll revenue growth during the same period. This expense growth incorporates reduction measures taken following the economic downturn followed by more than 8% growth in each of 2013 and 2014 which were both under budget. In 2015, total costs are projected to increase by nearly 12%.

DSCRs remain strong, reaching 2.70x in 2014 for the senior lien and 2.17x on a combined basis. The authority's financial forecast uses reasonable traffic and revenue assumptions including average annual traffic growth of 0.2% with no additional toll increases through 2018, leading to a 1.1% toll revenue CAGR. Operating expenses are projected to grow by the five-year CAGR of 2.2% which may be slightly optimistic.

Fitch's base case analysis assumes higher expense growth of 4.0% per annum and nearly \$1 billion in additional debt to partially support the large \$3.1 billion capital plan. Fitch notes it is likely that TBTA's board will approve the 4% biennial toll increases for 2017/2019 similar to the 2013/2015 increases and such toll increases have been incorporated in this analysis starting in 2019. Under this scenario, DSCR is projected to average 2.27x on a senior basis and 1.82x on a combined basis.

Fitch's rating case scenario envisions some decline in volume and higher elasticity to the assumed biannual increases as well as higher operating cost growth. Under this scenario, DSCR averages nearly 2.15x on a senior basis over the next ten years with an average of 1.73x on a combined basis. Breakeven analysis for TBTA demonstrates its ability to tolerate annual toll revenue declines without affecting its ability to service debt.

TBTA operates nine tolled facilities within NYC, consisting of seven bridges and two tunnels. These are the: Verrazano-Narrows (Staten Island-Brooklyn), RFK (formerly Triborough, Bronx-Queens-Manhattan), Bronx-Whitestone and Throgs Neck (both Bronx-Queens), Henry Hudson (Bronx-Manhattan), Marine-Parkway-Gil Hodges Memorial and Cross Bay Veterans Memorial Bridges (both Brooklyn-Queens); and the Queens Midtown (Queens-Manhattan) & Brooklyn-Battery Tunnels (Brooklyn-Manhattan). The Verrazano bridge is the only facility on which tolls are collected in one direction only, while the cash tolls for passenger cars on Marine Parkway & Cross Bay are half the level of those on the major facilities.

SECURITY

The general revenue and subordinate revenue bonds are secured by the net revenues collected on the bridges and tunnels operated by TBTA.