Maryland Transportation Authority’s credit quality not affected by Francis Scott Key Bridge collapse

S&P Global Ratings today said that the disruption and damage from the recent collapse of the Francis Scott Key Bridge (Interstate 695) in Baltimore is not expected to have immediate credit implications for its ratings on Maryland Transportation Authority (MDTA; AA-/Stable), which operates the bridge, nor on the ratings on the City of Baltimore general obligation (GO) debt (AA/Stable) or the State of Maryland GO debt (AAA/Stable). However, the long-term financial impact, particularly for MDTA, will likely be unknown for some time.

Maryland's governor declared a state of emergency early on March 26, as recovery efforts were underway. The Biden Administration has expressed a commitment to provide emergency funding in response to the disaster. The National Highway Transportation Administration administrator is expected to travel to Baltimore and oversee the release of federal emergency funds.

S&P Global Ratings expects receipt of federal, state, and local assistance, in addition to insurance reimbursements, will provide credit stability in the near term.

MARYLAND TRANSPORTATION AUTHORITY

We believe MDTA's credit quality remains resilient given that the authority is a diverse, multiasset system that achieves robust financial margins, providing 3.3x debt service coverage in fiscal 2023. MDTA also has sizable unrestricted liquidity balances, with approximately $889 million in available reserves as of fiscal year ended June 30, 2023. This level of reserves, in our view, provides MDTA with a sizable cushion to offset temporary revenue losses from the bridge collapse. However, potentially negative revenue trends and large capital needs resulting from bridge reconstruction could weaken the authority's creditworthiness. We will continue to monitor the financial impacts of the bridge collapse and the extent of state, local, and federal assistance to MDTA.

The Francis Scott Key Bridge is one of seven toll facilities designated as Transportation Facilities Projects under the trust agreement securing MDTA's toll revenue bonds outstanding. The authority had approximately $2.8 billion of toll revenue bonds outstanding as of fiscal year-end 2023. Toll revenues from the bridge ($56.1 million in fiscal 2023) represented 7.4% of the authority's $755.7 million of annual toll revenues. In our view, the MDTA's conservative approach to financial and capital planning; history of meeting or exceeding operational and financial goals; detailed financial forecasts that the authority updates frequently; and a capable, experienced management team that has considerable experience operating a tolling agency continue to support the rating.

The MDTA has a comprehensive program of insurance covering loss of revenues; general liability; and damage to bridges, tunnels, elevated roadways, approaches, and other property. Property damage and business interruption are insured by commercial policies that cover up to $300 million per occurrence. The MDTA has purchased excess insurance policies that provide general liability coverage in an aggregate limit of $148 million after a self-insured retention of $5 million; and terrorism and property liability coverage in an aggregate limit of $35 million after a self-insured retention of $5 million.