Yesterday, Fitch Ratings issued a press release regarding the Foothill/Eastern Transportation Corridor Agency’s (F/ETCA) outstanding debt. While F/ETCA bonds had been on a “negative outlook,” Fitch now has now placed the bonds on “negative watch” while they monitor the agency’s efforts to refinance within the next three to six months.
The announcement is not a surprise. It highlights the need to come to an agreement with Caltrans so that the refinancing can proceed. The one thing slowing down the F/ETCA’s plan to refinance $2.4 billion in outstanding toll road revenue bonds, to take advantage of lower interest rates and lower its annual debt payments, is California’s transportation agency, Caltrans. Click here to read more.
Fitch notes that the F/ETCA’s various reserves for debt service are projected to remain healthy. Fitch also recognizes that refinancing the agency’s debt to improve financial flexibility is a positive move.
All three rating agencies have given the refinance plan investment grade ratings and the California Treasure’s office, through its California Debt Investment Advisory Commission — issued a report that stating that “…the Agency’s restructuring is in the best interest of its bondholders, toll road users, and the general public.”
The next step is to finalize an agreement with Caltrans that will allow the F/ETCA to extend the ability to collect tolls the number of years necessary to pay back debt.
The F/ETCA has $2.4 billion in outstanding debt with an average interest rate of 6.09 percent and debt payments grow by an average of 4.4 percent each year. The refinance plan could reduce the debt payment growth to 3.5 percent per year or less. It is prudent to pursue a refinancing, just as thousands of people have refinanced their homes, to take advantage of historically low interest rates.