North Texas Tollway’s $1.126 billion refunding includes tender offer

The North Texas Tollway Authority is seeking savings through bond refundings and tenders in a $1.126 billion deal that tops this week’s municipal bond sale calendar. 

The NTTA scheduled a Thursday pricing for the tax-exempt debt offered in two series – $446.14 million of first tier revenue bonds to fund a tender offer for taxable bonds sold in 2020 and 2021 and refund 2015 Series B bonds for debt service savings. Nearly $680 million of second tier bonds will refinance 2015 Series A bonds. 

Horatio Porter, NTTA’s chief financial officer, said the tender offer marks the second for the agency after last year’s that resulted in a participation rate of about 25%.  In the coming tender, bondholders can shed debt the agency sold when interest rates were extremely low and invest the money in higher-yielding securities, he added. 

“Because we can buy them at a discount, it does provide us an opportunity to capture some savings,” Porter said.

Prices for the tender offer, which was announced Aug. 14, will be determined this week ahead of the deal’s pricing.

As for the refunding portion of the issue, NTTA is estimating a present value savings of about $90 million or 7% to 8%, according to Porter.

While some muni issuers are redeeming their taxable Build America Bonds as federal subsidies on the debt decreased, NTTA, which has about $825 million of the debt it sold in 2009 outstanding, has not taken the plunge.

“We looked at it last year and looked at it again this year, but those don’t seem to be economically attractive for us at this point,” Porter said. 

NTTA had $6.33 billion of first tier and nearly $2.64 billion of second tier bonds outstanding as of June 30.

Traffic and revenue, which during the COVID-19 pandemic fell dramatically on NTTA’s eight tollways, bridges, and tunnel in the Dallas-Fort Worth region, have bounced back to exceed 2019 levels. Debt service coverage ratios, which fell to 1.28 times in 2020 from 1.42 times in 2019, rose to 1.57 times in 2023. 

Toll revenue on the existing system is expected to increase from about $1.19 billion in 2024 to $1.59 billion in 2030 and $2.42 billion in 2040, according to the agency’s Comprehensive Traffic & Toll Revenue Study released in August.

Porter said the tollway navigated the pandemic with “very strategic decisions” and is well on its way back to growth mode. 

“The DFW area continues to be a very attractive part of the country to operate and live in,” he said. “People are moving here, but they’re not bringing any concrete with them. So we have to continue to widen what we can, extend what we can extend to create access for additional development, which spurs more traffic and activity.”

The population of the  Dallas-Fort Worth-Arlington metro area rose to 8.1 million after it added 152,598 residents between 2022 and 2023, marking the largest gain of any metro area during that period, according to the U.S. Census Bureau.

Along with toll revenue, the authority’s bond ratings have ratcheted higher.

Ahead of last year’s $577 million refunding deal, Moody’s Ratings upgraded its rating on NTTA’s first tier bonds a notch to Aa3 and second tier bonds to A1 and revised the outlook to stable from positive. One-notch upgrades to AA-minus and A-plus, respectively, from S&P Global Ratings came in 2022.

“All ratings are based on the NTTA’s essential roadway network located in one of the fastest growing U.S. service areas that will experience continued traffic growth,” Moody’s said in a rating report on the upcoming bond issue. “Combined with automatic biennial toll increases, growing traffic will produce strong revenue growth.”

S&P noted NTTA’s strong market position, financial risk profile, and management and governance. 

“The system continues to experience favorable traffic trends and remains committed to biennial toll rate increases, which has translated to solid revenue trends through economic cycles, helping maintain healthy financial margins” the rating agency said in a report, which pointed to NTTA’s $2 billion, five-year capital improvement program as an offsetting credit factor.

That program, which spans from 2024 to 2028, involves major maintenance projects, rehabilitation, and roadway bottleneck and capacity improvements. Porter said the agency currently expects to fund the program with cash from operations.

“So we don’t anticipate borrowing money for it,” he added.

As of June 30, NTTA had $766.3 million in unrestricted cash in its capital improvement fund and $45.1 million in its reserve maintenance fund. 

Bond issuance for toll roads highways and streets nationwide more than tripled to $8 billion in the first half of 2024 compared to the same period in 2023, when $2.5 billion of debt was sold, according LSEG Data & Analytics, formerly Refinitiv. 

“People are moving here, but they’re not bringing any concrete with them,” North Texas Tollway Authority Chief Financial Officer Horatio Porter said. So we have to continue to widen what we can, extend what we can extend.”

North Texas Tollway Authority

Moody’s gave the toll road sector a stable outlook for 2024 with the expectation that median traffic and revenue growth will be slower than in 2023, while remote-work patterns stabilize. 

“Macroeconomic measures such as GDP, population and employment growth will again become the main drivers of traffic growth, as they were before the pandemic,” the rating agency said in a December report.

First tier bonds in NTTA’s deal are structured with serial maturities between 2026 and 2038, as well as 2041 to 2045, according to the preliminary official statement. Second tier bond serial maturities are between 2026 and 2028, and 2030 to 2037. 

The deal’s underwriting team is headed by BofA Securities, which along with co-managers JP Morgan and RBC Capital Markets remain under review by Texas Attorney General Ken Paxton’s Office for their involvement in the Net Zero Alliance, which seeks a transition to net-zero greenhouse gas emissions by 2050. State laws enacted in 2021 prohibit state and local government contracts worth $100,000 or more with companies that “boycott” or “discriminate” against the fossil fuel or firearm industries. 

Barclays, which led NTTA’s 2023 bond sale, was banned from underwriting in January.

A constitutional challenge to the state’s fossil fuel boycott law was filed in federal court Thursday.

Other co-managers in the upcoming sale are Blaylock Van, Jefferies, Loop Capital Markets, Ramirez & Co., Raymond James, Siebert Williams Shank & Co., and Stern Brothers. 

The deal’s financial advisors are Hilltop Securities, Estrada Hinojosa, and RSI Group. Co-bond counsel and co-disclosure counsel are McCall, Parkhurst & Horton, and Locke Lord. 


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