Hampton Roads Transportation Accountability Commission raised by Moody's

Moody’s Ratings upgraded Virginia’s Hampton Roads Transportation Accountability Commission bonds and loans this week as part of the agency’s new states and territories methodology.

It upgraded the senior lien revenue bonds to Aa1 from Aa2 and intermediate lien notes and subordinate lien loans to Aa2 from Aa3.

It assigned the rating of Aa1 to the Series 2-24A senior lien bonds. The ratings’ outlooks are stable.

The upgrade affects $1.2 billion of senior bonds, $141 million of bond anticipation notes, and $1.5 billion of executed subordinate lien Transportation Infrastructure Finance and Innovation Act loans (2021 successor TIFIA bond, 2021 Hampton Roads Transportation Fund TIFIA bond and 2023A TIFIA bond).

The TIFIA loan has had $1.3 billion drawn.

Moody’s said the Hampton Roads Transportation Accountability Commission rating benefits from Virginia’s strengh and from a historically strong maximum annual debt service level.

Moody’s said the strength of the Commonwealth of Virginia, rated Aaa, was important to the rating, as it must annually appropriate money to repay the bonds. “The one-notch distinction in the rating from the commonwealth’s issuer rating incorporates the contingent nature of the obligation.”

The rating also reflects the bonds have a broad source of repayment in the sales and motor fuels taxes generated from a strong, diverse and regionally important economic base in the Hampton Roads region in Southeast Virginia, Moody’s said.

The rating is also based on a stable history of strong debt service coverage, which was continued in fiscal 2024 with a projected 3.5 times coverage maximum annual debt service coverage.

HRTAC is composed of four cities and 10 counties. It is a political subdivision of Virginia empowered to procure, finance, build and operate highway, bridge and tunnel projects in the Hampton Roads area.

The bonds are payable from a Virginia retail sales and use tax and motor vehicle fuels tax levied on HRTAC’s localities.

S&P Global Ratings rate the senior lien bonds and intermediate lien BANs AA and subordinate lien TIFIA loans AA-minus. S&P gave a similar explanation of the ratings of the senior bonds and intermediate lien BANs. It said the TIFIA bonds had weak-to-adequate coverage.

Fitch Ratings rates the Series 2021 Hampton Roads TIFIA loan BBB-minus. While the financial metrics are sound, the project has a midrange completion risk and somewhat weak revenue risk, as there are other alternative routes to the planned road. The HRTAC has a strong control over revenue but the debt structure is considered a middling factor, with flexible but escalating debt service.

HRTAC did not immediately respond to a request for a comment.