Texas Transportation Commission
$1,608,339,800 Central Texas Turnpike System Revenue Refunding Bonds, Series 2015 - ABC

Overview of Engagement

Estrada Hinojosa has served as financial advisor to TxDOT since 2010, and has worked on 24 transactions for a total par amount of $14.6 billion, more than any other financial advisor for Texas state agencies in that time period.  We have worked closely with the TxDOT’s Project Finance Division on five separate credits: the General Obligation Mobility Fund (described herein), the State Highway Fund, the Highway Improvement General Obligation Fund, the Central Texas Turnpike System (which runs SH-130, SH-45 N&SW, and Loop 1 toll roads), and the Grand Parkway Corporation (a new toll road circling the Houston Metropolitan area). 

 

Background of Transaction

On January 21, 2015, the Texas Transportation Commission (“TTC”) sold approximately $1.6 billion of Central Texas Turnpike System (“CTTS”) Revenue Refunding  Bonds, Series 2015-A, Series 2015-B and Series 2015-C  (the  “Bonds”).    The TTC owns and operates the CTTS – a 73-mile system of inter- connected toll roads in and around Austin.   The TTC undertook this historic transaction to increase financial flexibility by reducing debt service costs.

 

Relevance of Transaction

  • Recapitalization of CTTS. The transaction resulted in $384 million of net present value savings, with $948 million of gross debt service savings – a record for the TTC and for all Texas issuers. The TTC, together with its Financial Advisor (Estrada Hinojosa) and Senior Manager (Barclays), structured the Bonds to realize debt service savings from FY2026 to FY2042. In doing so, the TTC was able to reduce CTTS Maximum Annual Debt Service (“MADS”) by $154 million – from $423 million to $269 million – and thus significantly mitigate the risk of slower than projected traffic and revenue 
  • Largest Payoff of a TIFIA Loan. Proceeds of the Bonds were used to refund outstanding callable Series 2002-A capital appreciation bonds (“CABs”) and the entirety of a $900 million TIFIA loan to TTC for CTTS in 2002. This represented the largest  refunding of a TIFIA loan  since the  program’s inception  and reflects  a  very  positive   outcome of  TTC’s partnership  with  the  Federal  Highway Administration in utilizing the TIFIA credit program for the initial CTTS financing in 
  • New Lien in Credit Structure. The Series 2015-C bonds (rated “Baa1/BBB+/BBB” by Moody’s, S&P and Fitch, respectively) represented the inaugural issuance of Second Tier Revenue Bonds for the CTTS. Series 2015-C was comprised of $1.2 billion of current interest bonds and was the largest issuance of tax-exempt bonds in the “BBB” category in through September 25, 2015.  Overall, the CTTS Bonds represent the largest issuance of tax-exempt Toll Revenue Bonds through September 25, 
  • Rating Upgrades for First Tier Bonds. The Series 2015-A&B First Tier Bonds received ratings of “A3/A-/A-” from  Moody’s, S&P and  Fitch, respectively, reflecting one-notch  upgrades from each of Moody’s and Fitch.   These upgrades were the result of numerous meetings with the rating agencies which emphasized various credit strengths of 
  • Unique Bond Structure. Series 2015-B employed a unique structure incorporating premium callable CABs with an original par amount of $27,994,800 and an average issuance price of 331% of par. The maturity amount of the Series 2015-B CABs is $240 million. To preserve the TTC’s ability to refund the CABs, such bonds are subject to optional redemption on August 15, 2024 at the Accreted Value of the respective 
  • Highly Successful Marketing. The TTC, together with its Financial Advisor and Senior Manager, conducted an extensive marketing program including an online investor presentation, a series of lunches and numerous one-on-one calls with investors. These efforts resulted in over $6.1 billion of orders from over 100 investors.   In fact, nearly $2.1 billion of orders were generated from 65 investors that did not previously own CTTS bonds.

 

 

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