OREANDA-NEWS. February 22, 2016. Fitch Ratings has assigned an 'AA-' rating to the Florida Department of Transportation's (FDOT) approximately \\$106 million turnpike revenue refunding bonds series 2016B. The Rating Outlook is Stable.

The 'AA-' rating reflects the mainline's standing as a major turnpike with a history of strong traffic and increasing revenues and the strength of its service area. In addition, FDOT's capital improvement plan, while sizeable, has remained on time and on budget. A decreasing debt profile after maximum annual debt service (MADS) in 2019, coupled with strong toll revenues results in continued high coverage over the projection period, and breakeven analysis indicates that the toll agency could sustain continued substantial revenue declines without jeopardizing debt service.

KEY RATING DRIVERS

Revenue Risk - Volume: Stronger
Strategic Importance: Florida's Turnpike Enterprise's (FTE) toll roads comprise a critical transportation system with a mature traffic profile and established demand. As a result, toll transactions have grown steadily since 1990, reaching a five-year compound annual growth rate (CAGR) for the period 2010-2015 of 3.6% as a result of increased demand as well as additional lanes and roadways. Fiscal year (FY) 2015 (ended June 30) was strong with transactions and toll revenues rising by 10.6% and 8.7%, respectively, compared to the same period in FY 2014. Year-to-date FY 2016 traffic and revenue through four months are up an additional 11.8% and 8.3%, respectively. The network benefits from a strong commuter base that accounts for 95% of total transactions.

Revenue Risk - Price: Stronger
Strong Rate-Making Flexibility: Considerable economic flexibility exists to increase toll rates. Toll rates were increased effective June 24, 2012 for the first time since 2004. Per statute, annual increases indexed to the Consumer Price Index (CPI) will be applied to electronic payers going forward. Cash rate increases, also linked to CPI, will be implemented every five years. However, additional toll adjustments would also be permitted to meet rate covenant requirements and cover costs.

Infrastructure Development/Renewal: Stronger
Manageable Work Program: The turnpike's 2016-2021 tentative work program includes capital projects totalling \\$4 billion which assumes approximately \\$1.5 billion in additional borrowing during this period. While its current program is sizeable, FTE has a strong track record of delivering projects on time and on budget. Furthermore, its asset condition monitoring regime is considered robust.

Debt Structure: Stronger
Conservative Debt Portfolio: The turnpike's debt portfolio consists of fully amortizing, fixed-rate debt.

Financial Metrics:
Low Leverage and Solid Financial Margins: Leverage is moderate, currently being under 3x. Debt service coverage ratio (DSCR) increased to 2.83x in FY 2015 due to higher revenues from traffic growth and the indexing of electronic toll rates. Fitch expects DSCR to remain well above 2.0x for the foreseeable future after declining to 1.88x and 1.93x in FY 2011 and FY 2012, respectively.

Peers: Maryland Transportation Authority (MdTA)and Pennsylvania Turnpike Commission (PTC) are among FTE's closest peers, each operating strong turnpike systems with both urban and rural segments and considerable pricing flexibility. While FTE and MdTA feature comparable DSCR and leverage profiles leading to ratings at the same level, PTC's higher debt burden and resulting weaker metric profile is the primary cause of its lower rating of 'A+' and 'A-' on first and second liens, respectively.

RATING SENSITIVITIES

Negative - Declining Debt Service Coverage: Erosion of DSCR below 2.0x for a sustained period due to lower than anticipated revenues derived from toll increases would put pressure on the rating.

Negative - Financial Flexibility: Increases in leverage beyond historical levels as well as an inability to actively control operating expenses along with costs related to its work program would reflect a weakened credit profile.

Positive - Steady Financial Metrics: Completion of all debt-raising activity related to the current capital improvement plan while maintaining DSCRs consistently at or above 2.5x and leverage not materially above 3.0x would lead to positive rating action.

TRANSACTION SUMMARY

The authority is issuing fixed-rate refunding bonds in the amount of \\$106 million to partially refund the outstanding series 2006A bonds maturing from 2017 to 2027 for debt service savings. The amortization structure of the refunding bonds will approximately match that of the refunded bonds, and savings are expected in each year with net present value savings expected of around \\$15 million.

For additional information, see Fitch's press release 'Fitch Rates Florida Turnpike Enterprise's Rev Bonds
'AA-'; Outlook Stable', dated Jan. 5, 2016, available on the Fitch website, 'www.fitchratings.com'.