OREANDA-NEWS. Fitch Ratings has affirmed LBJ Infrastructure Group, LLC's (LBJ) approximately \$615 million senior lien revenue bonds series 2010 issued by the Texas Private Activity Bond (PAB) Surface Transportation Corporation and \$850 million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan at 'BBB-'. The Rating Outlook is Stable.

The affirmation reflects Fitch's expectation that the project will be delivered on schedule and on budget. Segments 1 and 3 were delivered on time while segment 2 remains on schedule. Regional macroeconomic demographics and development in the Dallas-Fort Worth metropolitan area is broadly in line with Fitch's expectations at closing. Corridor traffic and congestion levels continue to support Fitch's base and rating case traffic and revenue assumptions.

KEY RATING DRIVERS

Moderate Completion Risk: Construction has proceeded on schedule and on budget, and operations are on target to begin during 2015. Nevertheless, construction is occurring in an operating environment, and general purpose lanes (GPLs) must be kept open during most daytime periods. The fixed price turn-key contract has adequate protections that mitigate completion risk at the current rating level, as does the project's advanced stage. Completion Risk: Mid-Range

Strategic Asset Location With Competing Alternatives: As with all managed lane (ML) projects, the adjoining, free, competing GPLs will naturally make ML performance highly volatile. However, the facility is strategically located in a highly congested area north of Dallas and near Dallas-Fort Worth Airport. Continued population, and therefore traffic, growth in the area is widely expected over forthcoming years on top of the considerable population and employment growth experienced over the last decade. Revenue - Volume: Mid-Range

Expected to Have Some Rate-Making Flexibility: Demonstrated traffic congestion in both directions during weekday am and pm peak periods, weekday inter-peak, and weekend daytime supports the expectation of strong ratemaking ability. The price sensitivity to toll rates is uncertain given the highly demand-driven nature of toll rates; however, the proposed ML tolls are competitively priced and subject to a cap that can only be exceeded when the ability to manage travel speeds is demonstrably impaired. Fitch assumes operation close to the point of revenue maximization. Revenue - Price: Midrange

Infrastructure Renewal And Replacement: Upon completion, the project will have four-six new MLs, significantly increasing the capacity of the existing road and one-way frontage roads will be added. Infra/Renewal: Mid-Range

Debt Structure: The capital structure features both senior PABs and TIFIA loan, typical for this project type. All debt is fixed rate and fully amortizing. While the leverage and debt service coverage ratio (DSCR) tests in the equity contribution agreement are weak, a rating trigger exists whereby equity contributions will be met through a letter of credit should Cintra's financial health deteriorate (provided by its parent, Ferrovial, S.A., 'BBB'/Outlook Stable). High initial leverage is mitigated by equity contribution of at least 28% of the total capital structure, excluding public funds, that reduces leverage and provides for a strong sponsor incentive to remain committed to the project. Debt Structure: Stronger

Moderate Financial Flexibility and High Leverage: The project features an estimated \$23 million total debt per lane mile, despite significant public contributions and sponsor equity. In addition, net debt to cash flow available for debt service is high in 2016 at 25x, declining to 18x in 2017 according to analysis undertaken by Fitch when ratings were assigned. No future borrowing is expected. Fitch's analysis at financial close indicated a loan life coverage ratio of 1.6x in 2015 and a minimum project life coverage ratio of 2.2x, with both growing over time.

Peers: The closest peers from Fitch's rated portfolio include other ML facilities that are highly congested, particularly during peak hours such as the neighboring North Tarrant Express Segments 1&2 (NTE) and 95 Express Lanes LLC (95 Express), both of which have recently opened to traffic, and also serve areas with relatively strong demographic characteristics and limited alternative routes. Although still in the very early stages of ramp-up, early ML performance on both peers appears to be encouraging. Despite some differences in tolling mechanisms, policy and lane configuration, Fitch believes all three facilities should, in the medium term, build up moderate-high pricing power and be in a position to levy relatively high toll rates of over \$0.50 per mile (real) in peak periods.

RATING SENSITIVITIES

Negative: Sustained material traffic underperformance, or inability to raise tolls close to forecast levels, once operational that signifies more than just ramp-up issues, or a significantly prolonged ramp-up period that stretches liquidity/flexibility support.

Negative: Operating and capital expenditures during the operational period significantly above expectations that cause financial flexibility to be reduced and coverage profile lower.

Negative: Although increasingly unlikely, given the advances stage of construction, material construction delays or cost over-runs, which are not able to be passed down to the contractor, affect financial metrics and flexibility through the operational phase.

Positive: Sustained material traffic and/or toll rate over-performance once that results in a coverage profile significantly above Fitch expectations.

TRANSACTION SUMMARY

As of Dec. 31, 2014, the value of work completed was \$1.969 billion - approximately 94.9% of the total project cost. This reflects \$162 million of design work completed (97.7% of the budgeted \$165.9 million) and \$1.807 billion of construction work completed (94.7% of \$1,908.2m). Fitch understands that progress has since maintained this trajectory and that it is likely the MLs will be fully operational ahead of the official December 2015 service commencement date. The project also remains on budget. Outstanding works include the laying of decking on one remaining structure, putting down the final layer of asphalt along section 2 of the road, installation of gantries and signage, as well as painting and making other aesthetic improvements.

Sections 3 and 1 opened on schedule in December 2013 and July 2014 respectively. The project company has been operating both sections in order to test tolling systems, dynamic pricing, signage and advertising strategies before the road becomes fully operational, on completion of section 2. Importantly, no revenue was included in projections relating to this period, so any revenues collected are in addition to forecast. Both operational segments are now operating on a dynamic pricing basis.

It should be noted that no formal traffic update has been received since financial close and Fitch has not renewed its traffic, revenue and financial analysis since originally assigning its rating. Once the road is fully operational, Fitch will pay close attention to traffic and revenue development over time in order to benchmark against previous expectations and to inform updated analysis.