OREANDA-NEWS. Fitch Ratings has assigned an 'AA-' underlying rating to the Triborough Bridge and Tunnel Authority, New York's (TBTA) $300 million general revenue bonds series 2016A. The Rating Outlook is Stable.

KEY RATING DRIVERS

The 'AA-' long-term rating reflects the bridge and tunnel system's essentiality and performance, as well as a mature and stable traffic base with historically strong ratemaking flexibility. Offsetting concerns include the system's ongoing dependence on revenue growth to support annual transfers to the MTA for transit and commuter rail services. These transfers have left TBTA with lower liquidity and a dependence on future borrowing to fund a large part of its sizable capital plan. While the significant level of transfers to the MTA could be a risk, all resolution requirements of the authority's system are senior to this transfer.

Revenue Risk - Volume: Stronger
CRITICAL ASSETS: The bridge and tunnel system provides vital transportation links in the New York metropolitan area and is important to the regional economy, evidenced by its relatively stable historical traffic growth. As of 2014, traffic has grown at a 0.37% annual rate since 1970.

Revenue Risk - Price: Stronger
DEMONSTRATED TOLL INCREASES: The system has a mature and stable traffic base with historically strong ratemaking flexibility. While toll rates are elevated, traffic has remained relatively inelastic to TBTA's frequent increases. Between 2002 and 2014, TBTA has raised rates six times, resulting in a 0.4% annual decline in traffic with a 5% CAGR in toll revenues.

Infrastructure Development/Renewal Risk: Midrange
LARGE DEBT-FUNDED CAPITAL PROGRAM: TBTA has a large, mostly debt-funded (79%) 2015 - 2019 capital reinvestment program totalling $2.9 billion that is focused on state of good repair and includes $570 million in pay-go funding. TBTA's current projections include nearly $1 billion in new money issuance through 2019 for the 2010 - 2014 capital program.

Debt Structure Risk: Midrange
TRANSFER SUBORDINATION PROTECTS BONDHOLDERS: Structural subordination of transfers (ranging from $500 million - $630 million between 2012 - 2014) to MTA for operations ensures high senior and combined debt service coverage ratios (DSCRs). However, these transfers leave the authority short on liquidity support and reliant on additional debt to fund capital expenditures. The absence of cash-funded debt service reserves is a risk, partially mitigated by nearly $520 million of cash reserves in place as of August 2015. TBTA's aggregate revenues bonds are 81% fixed, 10% synthetically fixed and 9% unhedged variable rate.

Financial Metrics: TBTA has strong financial flexibility as demonstrated by its robust DSCRs of 2.70x on the senior lien and 2.17x on a combined basis in 2014. Senior leverage is relatively low at around 5x net debt-to-cash flow available for debt service (CFADS), increasing to over 6.0x by 2018 if additional senior lien debt is issued. Current total leverage of 6.4x is moderate and is expected to rise to over 7x with future issuances.

Peers: Bay Area Toll Authority (BATA; rated 'AA-'/Stable Outlook) is TBTA's closest peer. BATA has 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. This provides significant liquidity to the authority, while TBTA provides annual surplus transfers to MTA, limiting its ability to build reserves and making it more reliant on future toll increases.

RATING SENSITIVITIES

Negative:
--Lower-than-anticipated revenue yields from biennial planned toll increases or higher-than-anticipated expense growth;
--DSCRs on the general revenue bonds (senior lien) meaningfully below 2.0x or below 1.8x on a consolidated basis for a sustained period;
--Significant reduction in reserve levels with no expectation of replenishment.

Negative: Higher leverage than projected or an indication of maintenance being deferred to sustain continued MTA transfers.

Positive: Given the size of the issuer's capital program and its constrained liquidity, upward rating movement is not likely in the near term.

SUMMARY OF CREDIT
The proceeds of the $300 million general revenue bonds series 2016A will be used to finance various capital projects for TBTA. The bonds will be issued in a fixed-rate mode, amortizing through 2046.

For more information on the TBTA, please see Fitch press release 'Fitch Rates Triborough Bridge & Tunnel Authority's (New York) Revs 'F1+' dated Oct. 30, 2015 available at www.fitchratings.com.

SECURITY

The general revenue bonds are secured by the senior pledge of the net revenues collected on the bridges and tunnels operated by TBTA.