KBRA Assigns BBB- Preliminary Rating to the San Bernardino County Transportation Authority Toll Revenue Second Lien Obligation, 2019 TIFIA Series

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Kroll Bond Rating Agency (KBRA) assigns preliminary rating of BBB- to the San Bernardino County Transportation Authority (SBCTA) Toll Revenue Second Lien Obligation, 2019 TIFIA Series, which evidences the loan of up to $225 million from the United States Department of Transportation to the SBCTA. The TIFIA loan constitutes federal project credit assistance under the Transportation Infrastructure Finance and Innovation Act for the I-10 Corridor Contract 1 Project (the Project) located in San Bernardino County, California.

The TIFIA loan will have second-lien priority in project revenues. The interest rate will be set at closing at the 30-year U.S. Treasury State and Local Government Series rate plus 0.01%. The actual maturity of the TIFIA loan is limited to the earlier of 35 years after substantial completion of the Project (currently projected for July 2023) or December 1, 2057. Interest and principal on the TIFIA loan will be paid semiannually. The TIFIA loan will fully amortize by the projected maturity date, meaning there is no refinancing risk in the transaction. Proceeds of the TIFIA loan will be used to fund a portion of design-build and other costs for the Project, which are currently estimated at $928 million. Other funding sources for these costs include SBCTAs Measure I sales tax revenue, sales tax revenue bonds issued in relation thereto, and various federal and state funds and grants. Debt service coverage ratios for the TIFIA loan average 1.80x under KBRAs rating case and stressed assumptions KBRA used in analyzing project cash flows include higher construction and O&M costs, and lower traffic volumes.

The Project consists of the design-build, operations, and maintenance of improvements to approximately 10 miles of the I-10 corridor, in particular the construction of one to two tolled express lanes in each direction from the Los Angeles County line eastward to the I-15/I-10 interchange. The Project traverses the cities of Montclair, Upland, and Ontario. The Project is expected to reduce congestion for motorists using I-10, a critical link to and from Los Angeles County, San Bernardino County, and Orange County.

SBCTA is partnering with the California Department of Transportation and the Federal Highway Administration in the implementation of the Project and to ensure that Project development is in compliance with all applicable federal laws and regulations. Other key project participants include Lane-Security Paving Joint Venture as design-build contractor, TransCore LP as toll services provider, Parsons Transportation Group Inc. as program manager and independent engineer, HNTB Corporation as project and construction management consultant, and CDM Smith Inc. as traffic and revenue consultant.

KBRA analyzed the transaction using the Global Project Finance Rating Methodology published on November 28, 2017. KBRA will review the final operative agreements and legal opinions for the transaction prior to closing.

The preliminary rating is based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of a final rating that differs from the preliminary rating.

Preliminary Rating Assigned: San Bernardino County Transportation Authority Toll Revenue Second Lien Obligation, 2019 TIFIA Series

             
Debt Instrument     Rating/Outlook     Initial Principal Balance
Toll Revenue Bonds     BBB-/Stable     $225,000,000
       

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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Analytical:
Marisol Gonzalez de
Cosio, Senior Director
(646) 731-2463
[email protected]

Andrew Giudici, Managing Director
(646) 731-2372
[email protected]

Andrew Lin, Associate Director
(646) 731-2483
[email protected]

Harvey Zachem, Managing Director
(646) 731-2385
[email protected]