Fitch Ratings upgraded $2.19 billion in debt of the San Joaquin Hills Transportation Corridor Agency, citing rising traffic and revenue.
It increased the $1.9 billion in senior bonds from BBB- to BBB and $294 million in junior bonds from BB+ to BBB-. The Rating Outlook was revised from positive to stable.
“Financial metrics have improved in recent years,” Fitch said in a statement. “A consistent track record of rate increases suggests political flexibility is also solid. Over the past 10 years its rate covenant has been well tested and proven to provide creditors with significant protection.”
The 12-mile toll road, which connects south Orange County to John Wayne Airport, has the highest per-mile toll rate among Fitch-rated U.S. toll roads, excluding managed lanes and bridges.
“Toll road bonds have performed very well in 2017 due to two things: a stable economy, particularly in Orange County, and low gas prices,” said Terrence Loughran, a muni portfolio manager at the Irvine office of City National Rochdale. “It’s a good combination; it’s a rising tide for all ships.”
The agency’s 20-year bonds are yielding 3.15%, while its 10-year bond yield is around 2.7%, Loughran said.
—Peter J. Brennan