Orange County Toll Agency Successfully Refinances Over $1 Billion of Toll Revenue Debt

The San Joaquin Hills Transportation Corridor Agency today successfully refinanced $1.4 billion of its $2.2 billion in outstanding debt issued to fund construction of the 73 Toll Road. "This is great news for drivers and the communities that surround the 73 Toll Road," said Scott Schoeffel, Chairman of the San Joaquin Hills Transportation Corridor Agency, the joint powers authority responsible for financing the 73 Toll Road. "Refinancing improves the agency's long-term financial health by lowering the annual debt service payments and improving financial flexibility."

The bond issue was well received by the market with $2.5 billion in orders for a bond issue sized at $1.4 billion reflecting the 73 toll road's performance, rating upgrade and confidence in the credit profile. By taking advantage of the current historically low interest rates and extending the maturity dates of the prior bonds, the Agency was able to reduce the pressure on the Board to increase toll rates to the advantage of the users of the road. The interest rate on the restructured bonds averages 4.74 percent. The previous average was 5.72 percent - a reduction of nearly 100 basis points.

It is truly a remarkable achievement in this credit environment for a toll agency to receive such a positive response to the restructured debt given the size of the transaction and difficulties faced by other toll agencies across the country and demonstrates the trust the market has in the management of the Agency and the positive indicators for the road in the long-term.

The bond issue consisted of:

  • $1.1 billion in tax-exempt Senior Lien Current Interest Toll Road Revenue Bonds, with a 1.3-times coverage ratio requirement.
  • $300 million in tax-exempt Current Interest Junior Lien Toll Road Refunding Revenue Bonds, with a 1.1-times coverage ratio requirement.

The agency originally issued $1.1 billion in bonds in 1993 to finance construction of the 73 Toll Road. In 1997, the agency issued $1.4 billion of refunding bonds to refinance all but $220 million of the original 1993 bonds. In 2011, because of the severe financial stresses caused in part by the Great Recession, the agency restructured its debt by means of an agreement with existing bondholders, which amended a number of key covenants in the Master Indenture of Trust and extended the maturities on $430 million of the 1997 bonds to 2042.

Standard & Poor's and Fitch Ratings rated the agency's Senior Lien Bonds BBB- and the Junior Lien Bonds BB+. Both ratings are higher than the agency's previous ratings.

An additional feature of the transaction involved a tender offer and an offer to amend the terms of certain existing bonds that are not callable to further improve the refinancing results.

Barclays and Goldman Sachs acted as joint lead bookrunners; Nossaman acts as general counsel to the Agency.

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Nossaman LLP’s 30-plus infrastructure attorneys offer clients, colleagues, strategic partners, and industry media a wealth of practical experience, insider insight, and thoughtful analysis here on Infra Insight. We blog about what we know best, from industry-leading procurements to local and national policy developments that affect the market and our clients.

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