With D-B contractor ready to walk, Fitch Ratings downgrades Purple Line rating
Written by RT&S Staff
A tentative agreement has been reached with the firms behind the Purple Line project.
Purple Line
Fitch Ratings has downgraded the rating to ‘BB’ from ‘BBB-‘ on approximately $313 million of Maryland Economic Development Corporation senior private activity bonds (PABs), series 2016A-D issued on behalf of Purple Line Transit Partners LLC (PLTP) for the Purple Line light rail transit (LRT) project.
Fitch also has downgraded the rating to ‘BB’ from ‘BBB-‘ on the approximately $875 million subordinated Transportation Infrastructure Finance and Innovation Act (TIFIA) loan to PLTP for the project.
All instruments have been placed on Rating Watch Negative.
The downgrade reflects the project’s heightened completion risk in light of the design-build (DB) contractor, Purple Line Transit Constructors, LLC (PLTC), filing a notice of termination for extended delays. Project counterparties have been trying unsuccessfully for several years to come to an agreement on the amount of time and monetary relief due, increasing both schedule and cost risks. The varying levels of uncertainty are inconsistent with an investment grade rating.
The Rating Watch Negative reflects Fitch’s concern over the potential implications to the project from a potential termination of the DB contract at the current stage of construction, including the inability to draw on the existing performance bond and DB contract parent company guarantees. Execution of a global settlement agreement that addresses a new, achievable longstop date and ensures timely payments on all upcoming debt service obligations, in conjunction with successful resolution of the DB termination notice, would likely resolve the Rating Watch Negative.
The Fitch cases reflect timely completion, which, based on the original plan of finance and longstop date, is now not likely. Fitch will continue to monitor the situation and will update the cases once the issues are resolved.
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