TEXT-Fitch rates Alameda Corridor Transp Auth, Calif. bonds 'A'

Thu Jan 3, 2013 5:19pm EST

Related Topics

Jan 3 - Fitch Ratings assigns an 'A' rating to Alameda Corridor
Transportation Authority, CA's (ACTA, or the authority) $260 million in senior
lien revenue refunding bonds, series 2013A. Proceeds of the series 2013A bonds
will refund certain callable maturities of ACTA's 1999A senior lien bonds. Fitch
also affirms its 'A' rating on the authority's $1 billion in outstanding senior
revenue bonds, and affirms its 'BBB+' rating on $998 million in subordinate
revenue bonds. The Rating Outlook on all bonds is Stable.

ACTA also has $83.7 million in unrated series 2012 bonds, issued in connection
with the Federal Rail Rehabilitation and Improvement Financing (RRIF) program,
which are on parity with the rated senior revenue bonds.


ECONOMIC ESSENTIALITY: The corridor provides an important intermodal
transportation link, handling approximately 35% of all container throughput for
the two busiest container ports in North America (the ports of Los Angeles and
Long Beach, both rated 'AA' by Fitch). ACTA is a vital component of the ports'
core business. In fiscal 2012, ACTA handled 4.9 million 20-foot equivalent units
(TEUs) of the ports 14.1 million TEU throughput.

operating revenues, the ports of Los Angeles and Long Beach provide ACTA with
financial support in case of projected shortfalls to cover debt service
obligations. In both 2011 and 2012, each port paid $2.95 million in such
shortfall advance payments. Savings from refunding certain callable maturities
of ACTA's 1999A senior lien bonds could minimize the need for additional
shortfall advance payments. The two ports have strong financial capacity to meet
their commitments to collectively cover up to 40% of any required annual debt
service payments of both senior and subordinate bonds. BNSF and Union Pacific
railroads cover operating costs through separate assessment charges.

relatively high all-in leverage of 20x net debt-to-cash flow available for debt
service (CFADS). When including contingent port obligations, the leverage metric
is 14x. Under Fitch base and rating cases, leverage is expected to decrease to
16x (11x including port obligations) over the next five years. Annual debt
service obligations grow by 3% per year over the next five years, placing some
pressure on revenue growth.

MINIMAL CAPITAL NEEDS: The corridor has no capital program beyond closeout of
the original project and on-going maintenance. No additional borrowing for
capital projects is anticipated.


Underperformance in container-related trade volumes may adversely affect ACTA's
operating revenue generation and credit quality. Similarly, CPI adjustments may
constrain ACTA's rates (lower limit of 1.5%) and impact revenue growth.

Any material change in the credit quality of ACTA's key counterparties,
including the ports of Los Angeles and Long Beach for debt service as well as
BNSF and Union Pacific railroads to cover operating and maintenance expenses,
will likely affect the rating.


Bondholder security includes the pledged revenue stream and all other monies
held by the trustee except for the Maintenance and Operations (M&O) Fund and the
Reserve Account, both of which are for purposes of operating and capital
maintenance of the corridor. Pledged revenues consist primarily of the volume
assessment charges payable by the railroads and debt service shortfall advances
payable by the ports. A Use and Operating Agreement among ACTA, the ports and
the railroads governs the volume assessment of charges.


The series 2013A bonds are being issued to reduce debt service costs by
refunding all or a portion of $289 million in outstanding series 1999A bonds.
Proceeds will also be used to cover required deposits to the debt service
reserve account, or to purchase a surety policy covering this requirement. The
proposed refunding is expected to substantially reduce annual debt service
requirements, alleviating the need for additional shortfall advance payments in
the future. Present value savings are estimated to be 11.3%, or $33 million,
over the life of the bonds. Annual cash flow savings are projected to be $1.3
million for fiscal years 2014 through 2019, and $3.3 million for fiscal years
2020 through 2030. The refunding is not expected to extend the original maturity
of the refunded bonds.

The Los Angeles and Long Beach ports (both rated 'AA' with a Stable Outlook by
Fitch) are legally and individually committed under the operating agreement to
cover shortfalls up to 20% each of ACTA's annual debt service payment. Their
obligations were properly implemented in 2011 and 2012, with $11.8 million in
shortfall advances made collectively. In conjunction with these payments, ACTA's
rates for loaded containers were also increased by $1.12/TEU, an increase that
will remain in effect until the ports are fully repaid for their shortfall

Based on the ports' projections of TEUs, no additional advances were requested
for 2013 and no additional advances are likely to be needed in the near term.
The 2013 refunding will further reduce annual debt service requirements,
reducing the likelihood or magnitude of future shortfall advances. However,
should port volumes underperform relative to forecasts or if annual CPI-based
rate escalations are limited to the lower end of the 1.5% to 4.5% allowable
range, additional shortfall advances from the ports may become necessary.

The backstop provided by the shortfall advance structure improves ACTA's
standalone credit profile by virtue of the ports' superior financial resources
and near-term contractually obligated revenue streams. This backstop is
particularly important for the subordinate lien credit, which has lower coverage
levels from operating revenues, is more vulnerable to volume fluctuations, and
is more likely to depend upon shortfall advance funds in periods of slowing TEU
volumes. Approximately 60% of both ports' operating revenue comes from minimum
annual guarantees (MAGs) payable by tenants regardless of cargo volume. Both
ports have an adequate amount of unrestricted cash to meet any near-term
shortfall payments without having to adjust their rates or tariffs. However,
should there be a material adverse change in overall port throughput levels, or
should either port express an unwillingness to honor its obligations under the
shortfall advance structure, ACTA's credit quality may be affected.

For more information on ACTA's operational and financial performance, please
refer to Fitch's press release dated Nov. 30, 2012, available at

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012).

Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance