Tuesday, October 14, 2008

"This is in no way tied to concerns about the NTTA, its credit rating or its financial stability."

North Texas Tollway Authority takes out $100 million loan


Dallas Morning News
Copyright 2008

Acting just ahead of a November deadline to retire about $225 million in short-term notes used to finance the State Highway 121 toll road, the North Texas Tollway Authority took the unusual step Monday of taking out a private loan from Bank of America.

The $100 million loan will be used to retire one-third of the authority's remaining short-term notes, or $75 million worth. The remaining $25 million from the new loan will cover capitalized interest payments and other overhead charges, the authority said.

"This is in no way tied to concerns about the NTTA, its credit rating or its financial stability," authority spokeswoman Sherita Coffelt said. "We are simply giving ourselves options and seizing an opportunity."

Like many borrowers with strong credit ratings, NTTA finds itself locked out of traditional credit markets as nations around the world struggle to deal with a spreading banking crisis. Banks have all but stopped lending to one another, and activity in the municipal bond market has come to a standstill in recent weeks.

After finally winning the right to build the controversial State Highway 121 toll road a year ago last summer, the agency faced a tight deadline to deliver the $3.2 billion it had promised to pay for the contract. Rather than attempting to find long-term financing all at once for the balloon payment, the agency took out $3.5 billion in short-term notes that had to be retired within 12 months.

Over the last 11 months, the agency has converted more than $3.2 billion worth of the notes into long-term bond debt. But in recent weeks its efforts to complete the conversion have been stymied by what NTTA officials called Monday "an unprecedented" and "volatile" credit market.

The $100 million loan will carry a variable interest rate, which could be costly given the wildly fluctuating interests rates of the last month or so. It was unclear Monday whether the loan agreement, still under negotiation, will permit the authority to refinance without penalty once the traditional, fixed-rate bond market returns to normal.

© 2008 The Dallas Morning News: www.dallasnews.com

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