The Foothill/Eastern Transportation Corridor Agency (F/ETCA) has successfully refinanced $2.3 billion in outstanding debt that was originally issued in 1999.

“This is great news for Southern California drivers,” said Lisa Bartlett, F/ETCA Chairwoman and Mayor for the City of Dana Point.  “The refinancing enhances the agency’s financial position so that we can concentrate on providing and improving mobility.  We’ve lowered annual debt payments, which will provide pricing flexibility and cash flow for important projects.”

The refinancing extends F/ETCA debt from 2040 to 2053, lowers annual payments through 2040 and reduces maximum annual debt payment by 24 percent.  The bonds are being structured with various call dates and will be eligible for early redemption with excess revenue if the agency’s Board of Directors chooses to do so, thereby shortening the final maturity date and eliminating the need to make additional interest payments.

“The bond refinancing reduces debt payments by $975 million between now and 2040 and will create a flexible financing structure.  The restructuring of the debt keeps the agency in a very strong financial position and allows The Tolls Roads to continue to provide a valuable choice for Orange County residents and commuters,” said Patricia Bates, F/ETCA Vice Chairwoman and Orange County Fifth District Supervisor.

Traffic and revenue on the 36-mile toll road network has been growing with Orange County’s regional economic recovery.  For the first five months of the fiscal year (July thru December), traffic has increased two percent compared to the similar period in 2012 and revenue is up seven percent.

“The restructuring brings the agency’s debt in line with current revenue projections and strengthens our financial outlook,” said Amy Potter, CFO of the Transportation Corridor Agencies (TCA).  “The Board of Directors had authorized up to a 6.5 percent interest rate for the bonds, and the final result was 6.06 percent.  The annual growth rate for the bonds has been reduced from 4.2 percent to 3.75 percent and the peak debt service has been reduced by $74 million.”

In October, the F/ETCA Board of Directors approved the refinancing of its outstanding bonds and amendments to a cooperative agreement between the F/ETCA and Caltrans that allows tolls to be collected through 2053.  The following month, the F/ETCA received investment grade ratings from Standard & Poor’s and Fitch Ratings on its update to the proposed refinancing of the 1999 bonds.  With two ratings, the agency was able to move forward with the refinancing.

Standard and Poor’s noted that revenues have responded well to recent toll increases, that the willingness to increase tolls by management is a positive credit factor and that the restructuring plan reduces maximum annual debt service by $30 million (actual reduction is $72 million).  Fitch Ratings acknowledged that extending the debt by 13 years provides a more stable financial profile and that a history of pro-active decisions by management to raise rates is a credit strength.

“The 133, 241 and 261 Toll Roads provide a valuable link to the population centers in the Southern California region – which is the second largest metropolitan area in the country.  It’s a link to a burgeoning economic and employment center that is located in Orange County,” said Neil Peterson, TCA’s CEO.  “We are providing a valuable and affordable service to the people who are coming in and out of Orange County to get to those jobs.  Our board has a 13-year history of stepping up to the plate and meeting their financial obligations. Our toll revenues and our transactions have recovered strongly from The Great Recession and in the last three years have seen a steady increase. The refinancing provides cash flow savings to us between now and 2040, reduces the increase of our debt service requirements, lowers our maximum annual debt service, allows us a greater margin to exceed our coverage requirements of net toll revenues going forward.”

“The experience that we offer our customers is a choice of a predictable trip that saves time and stress,” said Peterson.  “The F/ETCA Board of Directors, finance team and staff are commended for the work they have put into making this refinancing a reality.”