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Orange County

2nd Firm Pulls Toll Bond Ratings

March 02, 2004|Dan Weikel | Times Staff Writer

A second Wall Street financial agency on Monday withdrew its investment ratings for a proposed $3.9-billion bond deal that is designed to keep Orange County's failing San Joaquin Hills toll road out of default.

Like Moody's Investors Service two weeks earlier, Standard & Poor's analysts said they canceled their ratings because the Transportation Corridor Agencies postponed a decision to merge the operations and finances of the passenger-poor San Joaquin Hills tollway and the more successful Foothill-Eastern tollway.

The TCA, which operates a 51-mile network of toll roads, has proposed consolidating the two turnpikes and refinancing them with a massive $3.9-billion bond issue. Board members delayed their vote last month to assess the risks of the deal and explore other options.

Earlier this year, Standard & Poor's gave the proposed refinancing its lowest investment grade of BBB- to $3.4 billion in bonds and a junk rating of BB to about $500 million in bonds.

On Feb. 20, Moody's withdrew its Baa3 rating -- the firm's lowest investment grade -- from the entire bond deal. Moody's and Standard & Poor's had rated the TCA's refinancing plan in anticipation of its approval.

Ratings are an important gauge of risk because they indicate the ability of the issuing company or government agency to pay interest and principal.

If the bond deal is ever approved, the TCA will have to seek new credit ratings from Wall Street based on the latest market conditions.

The San Joaquin Hills tollway, which runs 16 miles from Newport Beach to Laguna Niguel, has suffered from lower-than-predicted traffic and revenue growth. Projections indicate that by 2006 the highway could be in the first stages of default.

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