New York, September 26, 2019 -- Moody's Investors Service has upgraded the South Carolina Transportation Infrastructure Bank's revenue bonds to Aa3 from A1, affecting $1.48 billion of debt outstanding. The outlook is stable.
RATINGS RATIONALE
Revenue bonds issued by the South Carolina Transportation Infrastructure Bank (SCTIB) benefit from support and oversight from a strong parent government. The State of South Carolina (Aaa, stable) relies on the SCTIB to finance large-scale transportation projects and has a record of augmenting the SCTIB's revenue, both to ensure adequate debt service coverage and to provide funding for capital projects. The upgrade to Aa3 is based on expectations the state will continue to provide such support, while avoiding actions that materially erode the ratio of pledged revenue to debt service. The upgrade acknowledges that the governance ties between the state and the infrastructure bank (see profile section) offset the bonds' comparatively lax leverage constraint under the bond resolution, a material weakness for special tax credits.
RATING OUTLOOK
The stable outlook is supported by the likelihood that the state will continue to ensure pledged revenues provide adequate debt service coverage in view of SCTIB's pivotal role in financing state large transportation infrastructure projects.
FACTORS THAT COULD LEAD TO AN UPGRADE
- Programmatic enhancements, such as strengthening the additional bonds test
FACTORS THAT COULD LEAD TO A DOWNGRADE
- Deterioration in the state's credit quality
- Weakening of pledged revenues (or an increase in leverage) that leads to deterioration in debt service coverage
- Addition of lower-rated municipalities (or other borrowers) to the infrastructure bank's loan program
LEGAL SECURITY
The bonds are secured by pledged revenues as defined in the Master Revenue Bond Resolution, which consist of system payments (a junior lien on truck and motor vehicle registration fees and payments from the South Carolina Department of Transportation from non-tax sources, primarily Federal Highway Administration funds), loan payments from borrowers including the state's DOT or local governments, biennial transfers from a revenue stabilization fund and investment earnings on certain SCTIB funds.
USE OF PROCEEDS
Not applicable
PROFILE
The SCTIB was created in 1997 by state legislation to finance large transportation projects through grants or loans to local governments or other entities. The SCTIB's management is closely aligned with the state itself, given that its board of directors consists of seven members: the chair of the South Carolina Department of Transportation Commission and the other six appointed by the state's governor, the Senate president and the speaker of the state's House of Representatives (two appointees for each). The speaker and senate president's appointees must each include a member or their respective legislative chambers.
METHODOLOGY
The principal methodology used in these ratings was US Public Finance Special Tax Methodology, published in July 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.