DBRS Confirms High-Performance Transportation Enterprise – C-470 Project at BBB, Stable Trends

DBRS Limited (DBRS) confirmed the ratings of the Senior Revenue Bonds and the TIFIA Loan issued under the Transportation Infrastructure Finance and Innovation Act program (TIFIA) to partially fund the Colorado 470 (C-470) express lanes project (the Project or the Road) of the Colorado Department of Transportation (CDOT) at BBB. All trends remain Stable. The borrower is Colorado High-Performance Transportation Enterprise (HPTE), a government-owned business within, and a division of, CDOT, created by the Funding Advancements for Surface Transportation and Economic Recovery Act of 2009 (FASTER) and structured as an enterprise, pursuant to FASTER, to be exempt from Colorado Taxpayer Bill of Rights (TABOR) laws limiting public indebtedness. The rating is supported by CDOT’s direct involvement in the Project and its responsibility for cost overruns in the event of schedule delays but bounded by the uncertainty related to traffic volume levels on the managed lanes and the risk that traffic materially underperforms projections. The BBB rating is essentially informed by the rating of the operating phase.

The Project is now in its 36th month of construction and is 75% complete. At the time of the last rating report, the Design-Build (DB) Contractor was seeking compensation and a schedule extension of time to complete construction as a result of Project design changes relating to the Interstate 25/C-470 interchange initiated by CDOT. The matter was brought to a Dispute Resolution Board and a settlement agreement was reached on December 26, 2018. The settlement agreement offers incentive payments to the DB Contractor to complete the construction work by August 1, 2019.

The DB Contractor is working diligently to achieve the August 1, 2019, tolling commencement date. Tolling-equipment installation has been completed and tested and the final configuration of several key corridor elements is to be confirmed with paving, striping and final acceptance testing to follow. Although HPTE and CDOT acknowledge the DB Contractor’s efforts to achieve the August 1, 2019, project completion notice date, tolling commencement may be delayed until Q4 2019. Liquidated damages have been sized to cover all debt obligations if the DB Contractor-related delays cause HPTE to be in a revenue shortfall position. Notwithstanding that, DBRS notes that the failure to complete the Project is mitigated by the lack of traditional contractual transfer of construction risks to the private sector and that the Project’s rating is informed by the rating of the operating phase. As such, DBRS assesses that the failure to complete construction is less critical than would otherwise be the case.

The total debt service coverage ratio (DSCR) is projected to start at 1.73 times (x) and escalate to 4.89x in 2044. The Project can absorb a 48% reduction in traffic revenue across the 2018–2058 forecast period before the DSCR reaches 1.0x, which DBRS considers supportive of the rating. DBRS could take positive rating action if there is a continued trend of material outperformance of the traffic forecast and associated credit metrics but would consider negative rating action if there is a sustained deterioration of traffic volume.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is Rating Public-Private Partnerships, which can be found on dbrs.com under Methodologies & Criteria.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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