Fitch Affirms and Withdraws Santa Rosa Bay Bridge Auth (FL) 'D' Rating

Tue Apr 30, 2013 5:22pm EDT

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Fitch Affirms and Withdraws Santa Rosa Bay Bridge Auth (FL) 'D' Rating

Fitch Ratings affirms and withdraws its 'D' rating on Santa Rosa Bay Bridge Authority's, FL (the authority) approximately $125 million in outstanding revenue bonds, series 1996. This rating is withdrawn as it is no longer considered analytically meaningful.

Fitch previously downgraded the bonds to 'D' from 'C' on July 1, 2011 as a result of a debt service payment default. For additional information, please see Fitch's press releases dated July 1, 2011 and June 21, 2012, available at 'www.fitchratings.com'.

KEY RATING DRIVERS:

Ongoing Events of Default: Stemming from continued poor traffic and revenue performance, the authority's financial profile is extremely constrained leading to insufficient cash flow from operations to meet debt service obligations.

The authority depleted its debt service reserve fund in March 2012. Full scheduled debt service payments from July 1, 2011, Jan. 1, 2012, July 1, 2012, and Jan. 1, 2013 remain unpaid and it currently appears gross revenues will be insufficient to pay scheduled debt service on the bonds for the foreseeable future.

As of Jan. 1, 2013, the trustee, Bank of New York Mellon, declared the principal of the outstanding bonds ($131.2 million) to be due and payable immediately. While only $6.12 million was distributed for principal, the trustee expects to make periodic distributions of revenues in the future.

SECURITY:

The bonds are secured by the pledge of gross revenues of the authority. Moneys paid by Florida Department of Transportation (FDOT) under the lease purchase agreement are not included in the gross revenues.

CREDIT UPDATE:

The authority's revenue generating asset is the Garcon Point Bridge, which traverses the Pensacola Bay from Garcon Point on the mainland to the Gulf Breeze Peninsula to the south. The toll facility extends from US 98 to the south to I-10 to the north, covering approximately 12 miles.

Although toll revenues increased by 1.7% in fiscal 2011 (due to the fourth scheduled toll increase since the first in July 2001), cash flow from operations were insufficient to cover all debt service costs and the authority had its first debt service payment default on July 1, 2011 when the required $5 million principal and interest payment was not made.

Traffic has been considerably lower than the original plan of finance, with the authority's initial 1996 forecast projecting 3.79 million transactions in fiscal 2012 (ended June 30) versus actual performance of 1.29 million, approximately 34% of originally forecasted levels.

In fiscal 2012, traffic and revenues grew approximately 3% and 8%, respectively over fiscal 2011. The improved performance can be attributed to traffic recovery post Gulf Oil Spill and the full year effect of the January 2011 rate increase. Additional toll increases may be implemented at the recommendation of a traffic consultant and were previously contemplated for 2014 and 2017; however, the authority is currently without a consultant so future increases are unknown at this time. Materially improved performance beyond this point is unlikely due to the bonds' escalating debt profile and current level of traffic. Two free alternative routes (Pensacola Bay Bridge/US 98 to West, and State Route 87 to the East) are currently being expanded from two lanes to four and will increasingly limit any remaining ratemaking flexibility.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria & Related Research:

--'Rating Criteria for Infrastructure and Project Finance', 12 July 2012;

--'Rating Criteria for Toll Roads, Bridges, and Tunnel', 02 Aug. 2012.

Applicable Criteria and Related Research

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867

Rating Criteria for Toll Roads, Bridges, and Tunnels

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684146

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=790109

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Fitch Ratings
Primary Analyst
Tanya Langman, +1-212-908-0716
Associate Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Emari Wydick, +1-312-606-2308
Director
or
Committee Chairperson
Cherian George, +1-212-908-0519
Managing Director
or
Media Relations
Elizabeth Fogerty, New York, +1-212-908-0526
elizabeth.fogerty@fitchratings.com

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