OREANDA-NEWS. Fitch Ratings has affirmed the 'AA-' rating on Bay Area Toll Authority, CA's (BATA) approximately \\$5.7 billion outstanding senior lien toll bridge revenue bonds. The Rating Outlook remains Stable.

Fitch does not rate BATA's \\$3.6 billion of outstanding subordinate lien toll bridge revenue bonds.

The rating reflects the monopolistic nature of the asset with stable traffic and revenue performance on the authority's base following a period of significant toll increases. BATA's continued progress associated with their seismic retrofit capital investment program, which is now largely complete, limits additional future leverage. The rating is further supported by strong economic rating making flexibility and strong liquidity.

KEY RATING DRIVERS

Revenue Risk - Volume: Stronger
Critical Assets in Strong Service Area: The bridge system's long operating history and diverse, mature traffic base in the urbanized, wealthy and growing San Francisco Bay service area provides a critical transportation link and has demonstrated a resilient traffic base.

Revenue Risk - Price: Stronger
Monopolistic Position Supports Ratemaking Flexibility: BATA's near-monopolistic position and the region's economic strength provide management the ability to adjust rates to maintain a stable financial profile.

Infrastructure & Renewal Risk: Stronger
Well-Managed Capital Program: BATA is now approaching the completion of its seismic retrofit projects. Remaining projects within the program are limited in terms of scope although a number of issues need to be resolved following routine checks of various structures post-completion.

Debt Structure: Midrange
Variable Rate and Multi-Layered Swap Exposures: The authority maintains a comparatively complicated debt structure, featuring over \\$3.1 billion in variable rate debt hedged by \\$1.44 billion in fixed payer swaps, and the authority also has \\$478 million in fixed received swaps.

Sound Financial Metrics, Albeit Relatively Leveraged: BATA's total net debt to cash flow available for debt service is 12.2x with increasing debt service obligations through 2043. Management has a policy to maintain \\$1 billion in cash and investments, providing significant liquidity to the authority.

Peer Group: BATA's closest peer is Triborough Bridge & Tunnel Authority (TBTA; rated 'AA-/A+', Outlook Stable). BATA has a higher consolidated leverage at over 12x compared to 6.6x for TBTA; however, BATA has a policy to maintain \\$1 billion in cash and investments, providing significant liquidity to the authority while TBTA provides annual surplus transfers to MTA limiting its ability to build up reserves and making it more reliant on future toll increases.

RATING SENSITIVITIES

Negative/Positive: An increase in total leverage without corresponding toll increase that has a detrimental effect on BATA's financial metrics could put pressure on the rating while material deleveraging of the project could result in positive rating action.

Negative/Positive: Changes in BATA's traffic levels that result in a significantly improved or worsened financial performance could cause Fitch to review the rating.

CREDIT UPDATE

BATA's seismic retrofit program is now almost finished. Outstanding projects include the construction of a pedestrian/bike path on the east span of the San Francisco-Oakland Bay Bridge, as well as tackling a number of items added to the punch list following routine inspections. Remaining work relating to this program is expected to cost around \\$500 million, with the program expected to be completed by fiscal year (FY) 2016.

The strength of BATA's economic area is echoed in traffic counts continuing to exceed forecasts, growing by 3.8% in FY 2015 following a 2.9% increase in FY 2014. This moderate traffic growth brings the 5-year compound annual growth rate (CAGR) from FY 2010-2015 to 3.1%. As some of the bridges near their capacity, congestion periods have elongated during both the morning and afternoon peaks. Additionally, revenue growth has matched traffic counts adding 3.5% in FY 2015 bringing total revenue to \\$695 million. Revenues are expected to exceed \\$700 million in FY 2016 as year-to-date traffic and revenue through the first two months of FY 2016 are up 3.2% and 2.8%, respectively.

Toll rates are currently \\$5 per crossing for two-axle vehicles, up to \\$35 for seven-axle vehicles, and the authority does not have plans to implement further increases in the foreseeable future unless associated with a new capital program similar to the toll increases to fund regional measures 1 and 2.

BATA's debt service coverage ratios (DSCR) remain very strong at 2.54x for senior debt and 1.38x for subordinate debt in FY 2014.

Fitch received a sponsor case that had conservative annual traffic growth of 0.5% on all bridges except with the Bay Bridge's traffic being capped out at 43.4 million beginning in FY 2021 and no toll forecasted increases. Long-term operating expenses are projected to grow at 2% with the exception of one-time larger increases reflecting the East Span transitioning from capital expenses to a Category A maintenance expense.

Senior DSCRs (excluding liquidity and remarketing fees) remain well over 2.4x and subordinate DSCRs exceed 1.4x for nine of the next 10 years, leaving plenty of cushion for deeply subordinated \\$59 million annual transfer to the Metropolitan Transportation Commission (MTC). Senior leverage (defined as net debt to CFADS) falls from its current level 6.7x to around 5.1x over a 10-year horizon. Fitch's rating case assumes flat traffic performance and a 50 basis point increase to operating expenses. Senior DSCRs decline slightly but still exceed 2.3x with subordinate DSCRs over 1.3x over the next 10 years.

BATA is a public agency created by California law in 1997 to manage seven of the eight major bridge crossings in the Bay Area. (The eighth is the Golden Gate Bridge, which is managed by a separate entity.) These bridges provide the only viable vehicular links within the Bay Area. The governing body consists of 18 voting members and three non-voting members appointed for a term of four years. BATA has the same governing board members as the Metropolitan Transportation Commission that was created in 1970 to provide regional transportation planning and organization in the Bay Area.

SECURITY

The senior bonds are secured by a statutory lien on bridge toll revenues.