SAN FRANCISCO, July 3 A toll road operator in
California's Orange County, the Foothill-Eastern Transportation
Corridor Agency, is at risk of defaulting on its bond payments
if it does not refinance more than $2 billion of outstanding
debt, State Treasurer Bill Lockyer said on Wednesday.
"Without the refinancing, the risk of default is
unacceptably high, threatening negative consequences not only to
the agency and its bondholders, but to local governments and the
state as well," Lockyer said in a letter accompanying a report
supporting the agency's planned debt restructuring.
The agency's toll roads were built with proceeds from
toll-revenue bonds issued in the 1990s. Traffic and toll
collections have not been as strong as expected, the report
noted, adding that revenues are below the level needed to keep
up with increases in future debt service.
Orange County declared bankruptcy in 1994. With about 3
million residents, the Southern California county was the
largest U.S. county to have asked for protection from creditors
under Chapter 9 until Jefferson County, Alabama, did so in 2011.
The Foothill-Eastern Transportation Corridor Agency, one of
two joint-powers authorities created in 1986 to operate roads in
Orange County, plans to offer up to $2.4 billion of refunding
revenue bonds to refinance its outstanding debt. These refunding
bonds are rated at just above speculative grade with a Baa3
rating from Moody's Investors Service and a BBB-minus rating
from Fitch Ratings.
The agency had initially planned to offer the refunding
bonds next week, but has postponed their sale until later this
month at the earliest, agency spokeswoman Lisa Telles said. The
bond sale will be managed by Goldman Sachs and Barclays.
The report prepared by Montague DeRose and Associates, a
consulting firm for public-sector clients, supports the debt
restructuring because its lower interest rates should help ease
future debt payments.
The Montague report recommended that the Foothill-Eastern
Transportation Corridor Agency set aside a large share of
savings stemming from the debt restructuring.
The report also recommended that Caltrans, California's
transportation department, modify its Cooperative Agreement with
the toll-road agency to protect itself and bondholders.
Caltrans is technically the owner of the agency's toll
roads. The Orange County agency reimburses Caltrans for
maintaining the toll roads so the state has a stake in the
agency's finances, according to a Lockyer spokesman.