Kentucky Turnpike Authority Bond Rating Lowered To 'AA-' On Continuing Financial Pressures

CHICAGO (Standard&Poor's) March 4, 2016--Standard&Poor's Ratings Services has lowered its rating to 'AA-' from 'AA' on the Kentucky Turnpike Authority's economic development road fund bonds outstanding. At the same time, Standard&Poor's assigned its 'AA-' rating to the authority's series 2016A economic development road revenue bonds (revitalization projects), issued for Kentucky. The outlook is stable. "The downgrade reflects our view of escalating financial pressures tied to the state's long-term pension liability profile," said Standard&Poor's credit analyst Carol Spain, "as encompassed in our 'A+' issuer credit rating (ICR) on the state. (Please refer to our full analysis, published Feb. 22, 2016, on RatingsDirect.) Kentucky's overall pension funded ratio is severely underfunded and has declined

...constitutionally dedicated to road fund expenditures, we have observed that some states occasionally have redefined, rather than redirected, the revenues or eligible expenditures in ways that benefit their general funds. Most often, this has tended to happen when state general fund budgets are under pressure. In Kentucky's case, we view the sustained lack of progress on its pension funding as exerting pressure on all of the state's appropriation-backed debt, and therefore, we have lowered our rating on the road fund bonds to better align it with the state. "The '##-' ratings reflect our view of the good coverage of debt service obligations from road fund revenue," said Ms. Spain, "and the authority's limited capital needs and rapid amortization." Other factors include: + The pledge of lease payments to pay debt service from any available revenues in the road fund, subject to appropriation; and + The good bond provisions, which include a 2x maximum annual debt service (MADS) additional bonds...

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