KBRA Affirms Ratings for Pennsylvania Turnpike Commission Oil Franchise Tax Senior Revenue Bonds (AA) and Subordinated Revenue Bonds (AA-); Outlook is Stable

NEW YORK--(BUSINESS WIRE)--KBRA affirms the long-term rating of AA with a Stable Outlook for the Pennsylvania Turnpike Commission Oil Franchise Tax Senior Revenue Bonds as well as the long-term rating of AA- with a Stable Outlook for the Commission’s Oil Franchise Tax Subordinated Revenue Bonds.

Key Credit Considerations

The ratings were affirmed because of the following key credit considerations:

Credit Positives

• Established track record for effective collection and adjustment of the OFT as well as timely distribution of the Commission Allocation.
• Statutory price floor of $2.99 per gallon used in calculation of the OFT tax rate insulates collections from motor fuel price volatility.
• Legal and statutory framework provides strong levels of bondholder protection at the senior obligation level.

Credit Challenges

• Formula driven Commission Allocation is subject to fuel consumption volatility and to periodic adjustments of the effective fuel tax rate by the legislature.
• Absent Legislative action to adjust pledged revenues, the significant downward trend in motor fuel consumption experienced over the last decade is likely to continue, pressuring pledged receipts and debt service coverage over time.

Rating Sensitivities

For Upgrade

• Sustained increase in motor fuel consumption leading to a continued increase in Commission Allocation revenues.

For Downgrade

• Secular decline in MADS coverage to a level no longer consistent with the rating level due to factors including additional borrowing or a continuing decline in motor fuel consumption.
• Failure of the Commonwealth to maintain the statutory average annual price of fuel, a key component in determination of the OFT levy each year.

To access rating and relevant documents, click here.

Methodologies

Public Finance: U.S. Special Tax Revenue Bond Rating Methodology

ESG Global Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Only those ratings on securities issued by this Issuer that also are denoted on the Security Ratings tab for this Issuer on KBRA.com as “endorsed” by Kroll Bond Rating Agency Europe Limited into the European Union and/or by Kroll Bond Rating Agency UK Limited into the UK are covered by the disclosures set forth in this press release and the corresponding Information Disclosure Form. No other ratings on issuances by this Issuer have been endorsed into the European Union or the UK, and the disclosures set forth herein and in the corresponding Information Disclosure Form are inapplicable to those ratings and may not be used for regulatory purposes by European Union or UK investors in these securities.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.