Highway 407 debt gets positive ratingCompany expects traffic...

Highway 407 debt gets positive rating
Company expects traffic revenue to rise 12% over last year


FROM CANADIAN PRESS

A bond-rating service has given a positive rating to new debt being issued by the private company that runs and operates the Highway 407 toll highway.

Intervention by the Ontario government in the running of the highway isn't a serious risk to bondholders because 407 International Inc. is abiding by the rules set out in its agreement with the province, says a report released today by Dominion Bond Rating Service.

During the recent provincial election campaign, Liberal Leader Dalton McGuinty, now premier, said he would roll back tolls on the highway, which runs east-west just north of downtown Toronto.

Dominion's report said new debt issued by 407 International doesn't pose a serious risk to bondholders because the deal between the province and the company "provides for remedies from the province of Ontario to the company should, for example, the government legislate toll-rate decreases."

In addition, the bond-rating agency doesn't believe 407 International will take any action voluntarily that would hurt its financial health.

"Furthermore, DBRS strongly believes the remedies in the agreement would make provincial intervention prohibitively expensive," the report said.

Transport Minister Harinder Takhar said last week that his department will continue to look at the contract between the government and 407 International in regard to tolls.

So far this year, 407 International has had an "excellent year" with traffic revenues expected to increase 12 per cent compared to last year — higher than the rating agency had forecasted, Dominion said.

Much of that increase is due to higher tolls, "a trend that will diminish in significance over time," the agency said.

The company has also been able to keep customer service costs under control compared to last year, it added.

However, overall traffic for the year is expected to be level with last year due to bad weather conditions and the SARS outbreak.

But with higher revenue and lower expenses, the company's overall financial results for this year are expected to be "quite impressive," the agency said.