Last week, the North Texas Tollway Authority scored a touchdown by closing on $1 billion of bonds and notes to finance an 11.5 mile extension of the President George Bush turnpike in the Dallas Metroplex, which provides convenient access to the new Dallas Cowboys football stadium. A major factor in the success of the transaction is the participation of the Texas Department of Transportation in the financial structure. The project was originally to be procured as a P3 under TxDOT's CDA Program, but state legislation gave NTTA an option to develop and operate the project, for which NTTA agreed to pay TxDOT $458M as an "upfront payment." However, it became clear to the parties that a standalone revenue bond financing would not raise enough proceeds to build the project and pay the "upfront payment."
Following months of negotiation, NTTA and TxDOT entered into a "toll equity" loan agreement,
which under Texas law allows TxDOT to advance state funds to cover the costs of design, construction, operation, maintenance, and certain other eligible project costs. The NTTA has pledged those advances to cover shortfalls in debt service and budgeted operation and maintenance costs for the life of the project if revenues are insufficient to cover those costs. TxDOT's "backstop" was a major factor in the rating agencies assigning long term ratings in the "AA" category - a first for a "greenfield" toll road project in the United States.
Another major piece of the capital structure is a $420M subordinated TIFIA loan commitment that will be used to "take out" the short term taxable notes. Overlaying the TxDOT commitment with the senior bond financing and the TIFIA loan took some major play-calling in the huddle, but produced the lowest cost of debt.
The parties won't have long to savor this victory - planning for the addition of a companion project, the Southwest Parkway/Chisholm trail, is underway.
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