KBRA Affirms Bank-Enhanced AA-/K1+ Ratings for Pennsylvania Turnpike Commission Variable Rate Turnpike Revenue Bonds Series of 2020 (LOC-Backed)
3 Jun 2024 | New York
KBRA affirms the bank-enhanced long-term rating of AA- with a Stable Outlook as well as the bank-enhanced short-term rating of K1+ for the Pennsylvania Turnpike Commission Variable Rate Turnpike Revenue Bonds Series of 2020. The bonds initially and presently bear interest at a weekly rate and will be subject to mandatory tender upon conversion to an alternate rate period. The bonds are variable rate demand obligations with credit and liquidity support provided by an irrevocable direct pay letter of credit issued by TD Bank, N.A., a subsidiary of The Toronto-Dominion Bank. The ratings are based on an analysis of the structural and legal protections of the transaction and KBRA’s long-term and short-term rating of the Bank, affirmed on May 2, 2024.
Key Credit Considerations
The ratings were affirmed because of the following key credit considerations:
Credit Positives
- Strong structural and legal provisions of the direct pay letter of credit effectuate substitution of credit and liquidity risk of the Bank for that of the Commission.
Credit Challenges
- Reliance on direct pay letter of credit exposes Bondholders to systemic risk of the financial institutions sector.
Rating Sensitivities
For Upgrade
- Upgrade of the DPLC provider.
For Downgrade
- Downgrade of the DPLC provider.
To access rating and relevant documents, click here.