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Fitch Ratings I Press Release Page 1 of 3 <br />Fitch Rates Florida Municipal Loan Council Infrastructure Improvement Revenue <br />Bonds 'A' Ratings Endorsement Policy <br />17 Aug 2012 12:38 PM (EDT) <br />Fitch Ratings -New York-17 August 2012: Fitch Ratings assigns an 'A' rating to approximately $59.1 million in Florida <br />Municipal Loan Council (FMLC) infrastructure improvement revenue bonds, series 2012 (9B Design Build Finance <br />Project). The Rating Outlook on the bonds is Stable. <br />The bonds are expected to close on Sept. 7, and the proceeds will be used to accelerate the SR 9B road project within <br />Duval County to connect US 1 to 1-95 via an extension of SR 9B (the project). <br />KEY RATING DRIVERS <br />SOLID ABILITY & WILLINGNESS OF FDOT TO MEET OBLIGATIONS: Bond payments are derived from statutorily <br />authorized payments to be made by the Florida Department of Transportation (FDOT), subject to appropriation, pursuant <br />to a design build finance (DBF) contract. Pursuant to section 334.30 of Florida Statutes, FDOT can enter into DBF <br />contracts and other public private partnerships for projects included in FDOT's work program. Payments by FDOT can be <br />made over time, as long as obligations for such payments in total do not exceed 15% of total federal and state funding for <br />the State Transportation Trust Fund (STTF). Fitch views the credit quality of the statutorily authorized payments to be <br />made by FDOT pursuant to the DBF contract as 'A.' This rating will drive the rating on the bonds. Failure of FDOT to <br />appropriate during the principal repayment period or failure to include the project in future work programs would lead to a <br />payment default. <br />STRUCTURED ARRANGEMENT LIMITS COMPLETION RISK: The bonds are structured similar to a receivable financing, <br />with the bondholder isolated from the risk of the contractor failing to perform. The bonds are structured to have 1.0 times <br />(x) coverage. Bond proceeds are only drawn down for FDOT approved work, ensuring that at any time the combination of <br />bond proceeds, contract payments due from FDOT for approved work and structured liquidity is equal to the par amount of <br />the bonds. A termination of the DBF contract and certain other events would lead to a mandatory tender of the bonds, but <br />there is no premium should these occur, meaning that available resources should always be sum sufficient to cover debt <br />service. <br />INTERESTS OF FDOT & CONTRACTOR ALIGNED: While the structure of the transaction isolates the bondholder from <br />completion risk, the statutes that allow FDOT to enter into DBF contracts and FDOT's construction risk mitigation <br />procedures indicate that the interests of all parties are aligned. The DBF approach allows for project acceleration without a <br />short-term impact to FDOT's cash outlay. In addition, this particular financing structure includes a waiver of offsets by <br />FDOT once work has been approved, minimizing leverage on the DBF contractor's balance sheet. In conjunction with <br />these benefits, FDOT does require a surety bond sized to 100% of the contract price and will only be required to pay for <br />work approved. In addition, FDOT runs an annual qualification process for contractors and surety providers, and also has <br />clearly defined contractual arrangements. While bondholders are not exposed to contract frustration or contract default, the <br />proper alignment of interests between FDOT and the DBF contractor provides comfort. <br />WHAT COULD TRIGGER A RATING ACTION <br />--Change in the credit quality of FDOT's Statutorily Authorized Obligations. <br />SECURITY <br />The bonds are secured by FDOT Contract payments and all funds held by the Trustee pursuant to the indenture, including <br />the Project Fund and the Bond Fund, which includes the reserve account and capitalized interest account. The contractor <br />will also be providing a $2.6 million letter of credit (LOC) in favor of the FMLC and the Trustee that can be used to cover <br />administrative expenses and other items in the event of a mandatory tender. The bonds are not secured by payments <br />made by the Surety. <br />TRANSACTION SUMMARY <br />Pursuant to 334.30(1), Florida Statutes, FDOT is accelerating the 9B extension project within Duvall County. Total project <br />http://www.fitchratings.com/creditdesk/press_releases/detail.cfm?print=1&pr_id=758276 8/17/2012 <br />