Grand Parkway Transportation Corp., Texas' Series 2013A Bonds Rated 'BBB' With A Stable Outlook

Stocks and Financial Services Press Releases Thursday June 27, 2013 08:47
NEW YORK--27 Jun--Standard & Poor's

NEW YORK (Standard & Poor's) June 26, 2013--Standard & Poor's Ratings Services has assigned its 'BBB' rating, and stable outlook, to Grand Parkway Transportation Corp., Texas' (GPTC) pro forma $200 million series 2013A first-tier toll revenue bonds.

"We base our rating on the first-tier toll revenue bonds on traffic risk and an ascending debt service schedule, mitigated by the strong Houston economy and significant support from the Texas Department of Transportation, especially as evidenced by the availability of loans to benefit the subordinate lien," said Standard & Poor's credit analyst Adam Torres.

In our opinion, other weaknesses include:
  • High beginning toll rates;
  • Risks in the ramp-up period; and
  • Construction risk.
We believe first-tier credit strengths include:
  • The Houston economy, covering a diverse metropolitan area; and
  • Toll rates that are automatically raised annually, indexed to the greater of CPI or 2%.
The Grand Parkway is a proposed 184-mile loop around the greater Houston area. If completed as envisioned, it would be the third loop around the city.

As the governing body of the Texas Department of Transportation, the Texas Transportation Commission has created the GPTC to construct, finance, and operate portions of the Grand Parkway. The project is divided into multiple segments for planning purposes, and this financing will construct four segments in full, and complete the tie-in to an existing segment, with completion of all of these segments expected by early 2016.

The stable outlook reflects our expectation that construction will proceed as scheduled for an opening date by early 2016. To the extent that there are significant delays that could push back the opening and beginning of full toll collection, thereby jeopardizing debt service payments, we could lower the rating during our two-year outlook period. We do not expect to raise the rating within the outlook period.

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