Morningstar DBRS Confirms Credit Rating of BBB (low) With a Stable Trend on San Bernardino County Transportation Authority I-10 Express Lanes Project
InfrastructureDBRS, Inc. (Morningstar DBRS) confirmed its credit rating of BBB (low) on the $225.0 million TIFIA Loan (the 2021 TIFIA Loan) issued by San Bernardino County Transportation Authority (SBCTA). The trend is Stable.
The 2021 TIFIA Loan was raised under the Transportation Infrastructure Finance and Innovation Act (TIFIA) program to partially fund the expansion of approximately 10 miles of the Interstate 10 (I-10) Highway in San Bernardino, California (the Project). When the agreement for the 2021 TIFIA Loan was entered into on June 17, 2021, the previous $225.0 million 2019 TIFIA Loan was refinanced.
The credit rating confirmation reflects operations that have begun ramping up in line with projections.
KEY CREDIT RATING CONSIDERATIONS
The land for the express lanes is leased to SBCTA by the California Department of Transportation for a 50-year operating period. The Project is different from typical public-private partnership (PPP) projects as it does not feature risk transfer to a special-purpose vehicle as is generally found in PPP transactions.
The Project opened for operations on August 28, 2024, which is more than a year after expected. The delays arose because of the COVID-19 pandemic, replacement of nonconforming girders, and other delays in the construction of bridges and retaining walls. The debt servicing is less affected by delays in construction because the TIFIA loan repayment does not begin until December 31, 2027, and the construction phase security is considered strong.
Despite the Project being already open for operations, substantial completion of the construction contract is still pending. Litigation is ongoing with Lane-Security Paving Joint Venture (the Design-Builder). Legal claims have been made on the Project capital but would not affect the repayment of the TIFIA loan, which is paid by toll revenues. Although transaction volumes thus far have been 0.8% less than initially forecast, the implementation of higher toll rates resulted in toll revenues exceeding forecasts by 3.5% through March 2025.
The current estimated project cost at completion is approximately $963 million. As of August 31, 2024, approximately $855 million or 88.8% of the total project cost had been expended, including 95.5% of the Design-Builder construction cost.
CREDIT RATING DRIVERS
A positive credit rating action is unlikely in the ramp-up phase of the operations because of the lack of an established operating history.
Traffic volumes that are significantly lower than expected could result in a negative credit rating action.
FINANCIAL OUTLOOK
Traffic on the corridor, which was affected by the COVID-19 pandemic, has recovered to pre-pandemic levels. An update to the traffic and revenue (T&R) forecast by the T&R forecaster is expected toward the end of 2025. The updated forecast is also expected to factor in the longer-term beneficial effects of the I-15 corridor project and the I-10 Contract 2 project, which are targeted for completion in 2028 and 2029, respectively. The lower interest rates under the 2021 TIFIA Loan, compared with the previous financing, provide greater ability to withstand traffic shocks, with a forecast minimum debt service coverage ratio (DSCR) of 1.93 times and a revenue breakeven of 48%.
CREDIT RATING RATIONALE
The credit ratings reflect the Project's financial outlook, underpinned by strengths that include (1) fee-setting autonomy, (2) reserves and other support mechanisms, (3) a long-dated toll facility agreement, and (4) lower risk exposure to the construction phase. The challenges include (1) the inherent volatility of managed lanes, (2) traffic forecasting error, (3) exposure to economic conditions, (4) differential metrics calculation, and (5) high leverage.
ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) at https://dbrs.morningstar.com/research/454196.
CREDIT RATING DRIVERS AND FINANCIAL RISK ASSESSMENT (FRA)
(A) Weighting of Credit Rating Drivers
In the analysis of San Bernardino County Transportation Authority I-10 Express Lanes Project, the credit rating drivers listed in the volume-based section of the methodology are considered in the order of importance.
(B) Weighting of FRA Factors
In the analysis of San Bernardino County Transportation Authority I-10 Express Lanes Project, the following FRA factor listed in the volume-based section of the methodology was considered more important: Minimum DSCR.
(C) Weighting of the Credit Rating Drivers and the FRA
In the analysis of San Bernardino County Transportation Authority I-10 Express Lanes Project, the FRA carries greater weight than the credit rating drivers.
Notes:
All figures are in U.S. dollars unless otherwise noted.
Morningstar DBRS applied the following principal methodology:
-- Global Methodology for Rating Public-Private Partnerships (August 13, 2024) https://dbrs.morningstar.com/research/437820
Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025; https://dbrs.morningstar.com/research/447186/), which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.
The following criteria has also been applied:
-- Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196
The credit rating methodologies used in the analysis of this transaction can be found at:
https://dbrs.morningstar.com/about/methodologies.
A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.
The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.
Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.
DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277
Ratings
ALL MORNINGSTAR DBRS RATINGS ARE SUBJECT TO DISCLAIMERS AND CERTAIN LIMITATIONS. PLEASE READ THESE DISCLAIMERS AND LIMITATIONS AND ADDITIONAL INFORMATION REGARDING MORNINGSTAR DBRS RATINGS, INCLUDING DEFINITIONS, POLICIES, RATING SCALES AND METHODOLOGIES.