An Economic & Credit Perspective on COVID19

IBTTA Zoom Panel

9 July, 2020

Cherian George, Global Head

Infrastructure & Project Finance

Fitch Approach – Rating Through the Cycle

1 2 3 4 5 6 7

Years

Issuer A

Issuer B

‘Exit Point’

TTC Profile

Fitch Economics: Challenging Times Ahead

U.S. GDP Forecast

• 2020: -5.6%

• 2021: +4.0%

• Impact on traffic levels

• Forecasted recovery to 2019

levels by 2022

U.S. Unemployment Forecast

• 2020: 9.4% (3.7% in 2019)

• 2021: 7.8%

U.S. Inflation Forecast

• 2020: 0.5%

• 2021: 0.7%

• Implications on pricing

power/ability to raise toll rates

Global GDP Forecast

• 2020: -4.5%

• 2021: 4.9%

-15

-10

-5

0

5

10

15

1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 2022

(%, yoy) World Developed Emerging

Global GDP Growth (excluding China)

Source: Fitch Ratings' estimates

0

2

4

6

8

10

12

1997 2001 2005 2009 2013 2017 2021F

(% o

f la

bour

forc

e)

US - Unemployment Rate

Source: Fitch Ratings' estimates

Cash Flow Cases Cover a Range of Potential Outcomes

Coronavirus Rating Case • Calibrated to observed traffic losses early in Coronavirus in heavily impacted regions

• Recovery assumptions broadly compatible with Fitch’s economic forecast, global approach

• Actual traffic losses have tracked well to projections so far

• Multipliers for managed lanes (1.25x) and trucks (0.50x)

Coronavirus Downside Case • Tests higher severity of traffic losses, doubles trough loss period in 2Q20 an additional quarter

Coronavirus Severe Downside Case • Extends duration of impacted period under Downside Case, assumes a full recovery to 2019 traffic levels

doesn’t occur until 2024

Toll Road Coronavirus Traffic Scenarios

82.5

85.0

87.5

90.0

92.5

95.0

97.5

100.0

102.5

Q4 2019 Q2 2020 Q4 2020 Q2 2021 Q4 2021 Q2 2022 Q4 2022

(In

dex 4

Q19 l

ev

el =

100)

EZ UK USSource: Fitch Ratings' estimates

US, Eurozone and UK Real GDP Forecasts

65

70

75

80

85

90

95

100

105

4Q19 2Q20 4Q20 2Q21 4Q21 2Q22 4Q22 2Q23 4Q23 2Q24 4Q24

(2019=100)

Coronavirus Rating Case Coronavirus Severe Downside CaseSource: Fitch Ratings

Toll Road Traffic Scenarios - Rolling 4Q

Covid19 Highlights Value of Liquidity

02468

10

West VirginiaParkways

Authority (WV)

FloridaDepartment ofTransportation

(FL) [FloridaTurnpike]

MarylandTransportationAuthority (MD)

New HampshireTurnpike System

(NH)

Ohio Turnpikeand

InfrastructureCommission

(OH)

OklahomaTurnpike

Authority (OK)

PennsylvaniaTurnpike

Commission(PA)

New JerseyTurnpike

Authority (NJ)

Maine TurnpikeAuthority (ME)

ITR ConcessionCo.

(x)

2020 Liquidity Coverage Ratio — Turnpikes

Note: Liquidity coverage ratio calculated as sum of the cash debt service reserve fund plus unrestricted cash and operating reserve fund divided by total debt service in fiscal 2020. Source: Fitch Ratings.

0

2

4

6

8

10

Harris County(TX) [Toll Roads]

Delaware RiverJoint Toll BridgeCommission (PA)

Central TexasTurnpike System

(TX)

Bay Area TollAuthority (CA)

Illinois State TollHighway

Authority (IL)

Miami-DadeCounty

ExpresswayAuthority (FL)

MassachusettsTurnpikeAuthority

MetropolitanHighway System

(MA)

Central FloridaExpressway

Authority (FL)

Triborough Bridge& Tunnel

Authority (NY)

(x)

2020 Liquidity Coverage Ratio — Expressways and Monopolistic Bridge Systems

Note: Liquidity coverage ratio calculated as sum of the cash debt service reserve fund plus unrestricted cash and operating reserve fund divided by total debt service in fiscal 2020. Source: Fitch Ratings.

Covid19 Highlights Value of Liquidity (Contd.)

05

101520

Osc

eola

Pea

ce B

rid

ge

Gra

nd

Par

kway

Fo

oth

ill E

aste

rn

RIT

BA

Ric

ken

bac

ker

Fo

rt B

end

Ric

hm

on

d

Ch

esap

eake

SJT

A

SJH

TC

A

KP

TIA

To

ll R

oad

In

vest

ors

NC

TA

Eliz

abet

h R

iver

Cro

ssin

gs

E-4

70

McA

llen

Mid

-Bay

Bri

dge

Lare

do

SA

ND

AG

Alli

gato

r A

lley

Su

nsh

ine

Skyw

ay

(x)

2020 Liquidity Coverage Ratio

Note: Liquidity coverage ratio calculated as sum of the cash debt service reserve fund plus unrestricted cash and operating reserve fund divided by total debt service in fiscal 2020. A30 coverage includes revenues from availability payments. Source: Fitch Ratings.

0

2

4

6

8

10

NTE MobilityPartners Segment 3

LLC (NY)

I-77 MobilityPartners

LBJ InfrastructureGroup LLC

BlueridgeTransportationGroup LLC (FL)

95 Express LanesLLC

Colorado HighPerformance

TransportationEnterprise (CO)

North TarrantExpress Mobility

Partners (NY)

Plenary RoadsDenver

(x)

DSRA – Debt service reserve account. Note: No liquidity ratio was produced for I-66, TxDOT IH-35E or RCTC I-15 because there is no mandatory debt service due in 2020. RCTC SR-91's liquidity ratio reflects debt service based on a prior projected refinancing that has not yet taken place due to coronavirus market disuprtions; the commission may proceeds when market conditions normalize.Source: Fitch Ratings, issuers.

2020 Liquidity Coverage Ratio(Total Liquidity + DSRA Coverage)

Fitch Coronavirus-related Ratings Actions

Toll Roads: Downgrade Entrevias Concessionaria de Rodovias S.A. (Brazil)

P. A. Concesion Ruta al Mar, (Colombia)

Autopistas del Sol, S.A. (Costa Rica)

Ellaktor S.A. (Greece)

PT Angkasa Pura I (Indonesia)

ASTM S.p.A.(Italy)

Societa di Progetto Brebemi S.p.A. (Italy)

Concesionaria Mexiquense, S.A. de C.V.(Mexico)

ENA Este, S.A. (Panama)

ENA Norte Trust (Panama)

Toll Road Investors Partnership II, L.P. (USA)

Toll Roads: Reversions to Stable

Outlook Shenzhen Expressway Company Limited

(China)

Pennsylvania Turnpike Commission (USA)

South Jersey Transportation Authority (USA)

Toll Roads: Stable to Positive Outlook Texas Department of Transportation I-35E ML

(USA)

Global Total Affirmed/Stable RWN/Downgrade

Airports 109 8% 17%

Seaports 37 70% 11%

Toll Roads 116 69% 12%

Most US Ratings Remain Stable

56 Publicly Rated Toll Roads

Turnpikes (10 Issuers, 13 Liens)

Large Xpressways (9 Issuers, 13 Liens)

Small Networks

(24 Issuers, 30 Liens) Managed Lanes

(13 Issuers, 14 Liens)

0 2 4 6 8

AA

AA-

A+

A

A-

BBB+

BBB

BBB-

BIG

0 2 4 6 8

AA

AA-

A+

A

A-

BBB+

BBB

BBB-

BIG

0 2 4 6 8

AA

AA-

A+

A

A-

BBB+

BBB

BBB-

BIG

0 2 4 6 8

AA

AA-

A+

A

A-

BBB+

BBB

BBB-

BIG

Ra

tin

gs

Outlooks

Rating

Actions

2 Negative Outlooks

3 Negative Outlooks

1 Rating Watch Negative

1 Downgrade 3 Negative Outlooks 1 Negative Outlook

BIG – Below investment grade. Source: Fitch Ratings,

11 Available at www.fitchratings.com

Fitch Coronavirus Stress Test Reports

12

www.fitchratings.com

New Travel & Commuting Landscape

Different, but how different is the question

Economy will recover; commuting volumes likely will be lower

Congestion will also likely be lower, but not eliminated

Roadway capacity still limited in peak hours

Underlying economic conditions will still drive demand

General economic activity will still drive inter-peak activity

There will be unanticipated impacts, some will be positive

Overall volumes likely marginally lower for the foreseeable future

Franchise Strength Matters to Credit Strength

Economically stronger and diverse assets will be more marginally

affected

Assets with midrange to weaker economic profiles and those with

less diversity will likely be more affected

However, credit stability for most stronger and midrange assets is

largely in the hands of management

Maintaining Dry Powder Enhances Credit Stability

Institutionalized approaches to management that plan for the

downside – operations, maintenance and capital investment

Internal financial policies that aren’t driven by the race to the

bottom, i.e. weakened lender protections

Liquidity policies that provide short-term stability, i.e. consider the

maintenance of both near-term operational and financial stability

Balanced dependence on debt based on enterprise strength &

objectives; for enterprise systems this often means a healthy

balance between cash-funded and debt funded investment

Public versus private management/ownership, in particular,

warrants different approaches as the objectives are not all the same

Public Management Carries an Added Obligation

Implementing public policy

This is in the near-term, medium-term and the long-term

Investment capacity often is the issue

Now this capacity will be more constrained for a while than before

Financial flexibility is critical to meeting those obligations

That involves pricing flexibility and borrowing flexibility

Not just near-term, but in the medium-term and long-term

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