The North Texas Tollway Authority is embarking on a significant bond sale worth $1.126 billion, with the aim of seeking savings through bond refundings and tenders. This huge deal is set to be executed in two series, with $446.14 million of first tier revenue bonds designated to fund a tender offer for taxable bonds sold in 2020 and 2021, as well as refunding 2015 Series B bonds for debt service savings. Additionally, nearly $680 million of second tier bonds will be utilized to refinance 2015 Series A bonds. This strategic move highlights the NTTA’s proactive approach to managing its debt portfolio and seeking savings through efficient refinancing maneuvers.
Horatio Porter, the Chief Financial Officer of the NTTA, emphasized that the upcoming tender offer marks the second initiative of its kind for the agency, following last year’s endeavor that resulted in a participation rate of about 25%. The ability for bondholders to offload debt issued during a period of historically low-interest rates and reinvest in higher-yielding securities is a compelling opportunity. Porter expressed optimism about capturing savings through the discounted acquisition of these bonds. The agency is estimating a present value savings of around $90 million, translating to 7% to 8% in potential savings. The meticulous planning and forecasting involved in predicting these savings reflect the NTTA’s dedication to maximizing its financial efficiency.
NTTA’s Resilience Amidst Shifting Economic Conditions
The NTTA’s decision not to redeem its taxable Build America Bonds, despite the decrease in federal subsidies on such debt, underscores a measured approach to financial management. Porter indicated that the economic attractiveness of redeeming these bonds was carefully evaluated last year and this year, with the conclusion being that it is not currently favorable for the agency. This cautious stance reveals a prudent consideration of the economic landscape and optimal timing for strategic financial moves. The agency’s ability to navigate the challenges posed by the COVID-19 pandemic, with traffic and revenue bouncing back to surpass 2019 levels, demonstrates resilience and adaptability in the face of adversity.
Looking ahead, the NTTA anticipates robust growth in toll revenue, signaling a positive trajectory for the organization. The agency’s Comprehensive Traffic & Toll Revenue Study forecasts a substantial increase in revenue from $1.19 billion in 2024 to $2.42 billion in 2040, reflecting long-term sustainability and growth. Porter highlighted the need for continued infrastructure development and expansion to accommodate the population influx in the Dallas-Fort Worth region. The agency’s commitment to widening existing infrastructure to support additional development aligns with its vision for fostering economic activity and enhancing transportation accessibility.
The NTTA’s bond ratings have experienced upgrades from prominent rating agencies such as Moody’s and S&P, citing the agency’s essential roadway network and strong revenue growth potential. Moody’s emphasized the agency’s favorable revenue trends and automatic toll rate increases, which contribute to robust financial margins and creditworthiness. S&P acknowledged NTTA’s strong market position and sound financial risk profile, further bolstering investor confidence in the agency’s bonds. The agency’s $2 billion capital improvement program, funded by cash from operations, underscores a commitment to maintaining and enhancing its infrastructure for long-term sustainability.
Market Trends and Regulatory Challenges
The toll road sector has witnessed a significant increase in bond issuance, reflecting a growing trend in infrastructure financing. Moody’s stable outlook for 2024 anticipates slower traffic and revenue growth, as remote-work patterns stabilize and macroeconomic indicators drive traffic trends. The regulatory landscape presents challenges, with underwriting firms under review by the Texas Attorney General’s Office due to their involvement in initiatives like the Net Zero Alliance. Compliance with state laws regarding contracts with companies related to fossil fuels or firearms adds a layer of complexity to the agency’s financial transactions.
The North Texas Tollway Authority’s strategic approach to debt management, infrastructure development, and financial planning demonstrates a commitment to long-term sustainability and growth. By leveraging opportunities for savings through bond refundings and tenders, navigating economic uncertainties with resilience, and prioritizing infrastructure expansion, the NTTA is positioning itself for continued success in the evolving landscape of municipal finance.