Global Credit Research - 25 Jun 2015

Rating Update: Moody's affirms ratings on Metropolitan Washington Airports Authority (DC) Dulles Corridor Enterprise/Dulles Toll Road (DTR) outstanding debt, including TIFIA loan; outlook is stable Global Credit Research - 25 Jun 2015 $1.278 billion in TIFIA; $1.728 billion other outstanding debt rated METROPOLITAN WASHINGTON AIRPORTS AUTHORITY, DC DULLES TOLL ROAD ENTERPRISE Toll Facilities DC NEW YORK, June 25, 2015 --Moody's Investors Service affirms the ratings on all Metropolitan Washington Airports Authority (MWAA) debt issued for the Dulles Corridor Enterprise and backed by the Dulles Toll Road (DTR), including the Transportation Infrastructure Finance and Innovation Act (TIFIA) loan. We affirm the A2 for the first senior, the Baa1 for the second senior, the Baa2 for the subordinate lien and the Baa2 for the fourth lien TIFIA loan backed by revenues of the DTR operated by MWAA. All liens have a stable outlook. SUMMARY RATING RATIONALE The ratings are affirmed with a stable outlook based on stable toll road operating and financial performance and strong liquidity. We do not expect the added cost of the Dulles corridor Metrorail Project Phase 1 or the 13-month extension for Phase 2 to have a credit impact or require additional debt, given the large amount of available project budget contingency and the ability to re-allocate funds from Phases 1 and 2. The Baa2 for the TIFIA is due to the large amount of debt at this lien; its deep subordination and back-loaded and escalating debt service profile. Credit strengths include a satisfactory rate covenant of 1.20 times and a debt service reserve fund (DSRF) at 10% of principal funded from net annual toll revenues prior to substantial completion of Phase 2. Though the TIFIA may spring to first senior status under a bankruptcy related event (BRE), we believe this to be remote given MWAA has no legal authority to file for bankruptcy. Also, there is no acceleration of debt upon a default and no cross-default between the liens. The Baa1 rating for second senior bonds secured from net revenues of the DTR is based on healthy minimum debt service coverage ratios (DSCRs) under base and stress case scenarios; no expected additional debt and reasonable assumptions about traffic growth in the socioeconomically above average service area in suburban Washington DC. A portion of the outstanding bonds and TIFIA loan provide funding for the MWAA DTR's share of Phase 2 Metrorail project (Silver Line) construction costs. The MWAA DTR has no operational or capital improvement risk for the Metrorail project once completed and operational. Phase 1 of the Metrorail project has had a $76 million cost increase due to safety and design changes approved early this year. MWAA is responsible for $57 million of those additional costs and has the flexibility to roll the costs into Phase 2, which has a sizeable $551 million construction budget contingency. MWAA is now expecting a 13- month extension of the Phase 2 schedule in order to accommodate design changes that enhance safety and reliability, reflecting lessons learned in Phase 1. Under the executed TIFIA loan agreement the authority may issue up to $150 million in additional bonds, but no additional debt is currently expected. The two notch differential for the A2 senior lien rating is based on significantly stronger legal covenants than the subordinate liens and reservation of this lien for toll road only projects. OUTLOOK The stable outlook reflects reasonable assumptions for traffic and revenue growth to support high leverage and achieve forecasted DSCRs despite back-loaded debt as well as the potential for additional cost increases to complete Phase 2. Future credit reviews will focus on the adequacy of toll revenues to maintain targeted DSCRs above 2.0 times for first senior; 1.60 times for second senior and 1.30 times for subordinate lien bonds and above 1.25 times for all debt including the expected fourth lien TIFIA bonds. We also will focus on the MWAA's and DTR's ability to make reserve fund deposits; meet future DTR and Metrorail capital needs; maintain liquidity levels

and deliver the Phase 2 Metrorail construction project on schedule and within the current overall budget. WHAT COULD MAKE THE RATING GO UP -First senior lien rating is not likely to be pressured up given the single asset nature and high total leverage -Second and subordinate lien ratings could be pressured up if traffic and toll revenues increase more than forecasted through growth and rate increases and these produce higher DSCRs and financial margins than currently forecasted -Completion of the Phase 2 Metrorail project under the current budget and schedule also would exert positive pressure WHAT COULD MAKE THE RATING GO DOWN -Lower than forecasted traffic that reduces forecasted DSCRs and liquidity -Escalation of construction cost for the Metrorail that would require a significant increase in DTR debt STRENGTHS -DTR is a mature toll commuter toll facility with a 30-year history of traffic and toll revenue that is being leveraged to finance construction of the Metrorail extension project. The road connects affluent residential with major commercial areas (Tyson's Corner) in the Metro Washington, DC MSA -MWAA has independent toll-setting ability, and has demonstrated willingness to do so, raising rates five times in the past five years in support of debt issued for the Metrorail project. Current rates are relatively low for the service area and leave room for future expected rate increases at five-year intervals -Slightly better than forecasted traffic and revenue performance through FY 2014 and lower debt service due to lower interest rate for 2014 bond issues -Forecasted debt service coverage ratios (DSCRs) are expected to remain well above indenture requirements -About 83% electronic toll collections (ETC) in FY 2014 enhances operating efficiency as well as the ability to increase rates -A favorable long-term economic outlook for service area MSA -The three publically rated liens are adequately protected by cash flow and covenants, and debt service is paid ahead of any Metrorail capital or operating outflows. -Strong federal, state and local support with committed funding for the Metrorail project from FTA FFGA as well as highly rated MWAA, Virginia (Aaa), Fairfax County (Aaa) and Loudoun County (Aaa) -Strong management oversight by professional management team, which has managed over $6 billion in capital projects at MWAA, including the completion of Phase 1 -Ten-year concession tail after final debt maturity allows further debt structuring flexibility, if needed CHALLENGES -Actual traffic and revenue through April 2015 is below forecast largely due to severe winter weather in the first three months of 2015 though we note FY 2014 traffic and revenue came in slightly above forecast and met the forecast, respectively -There are no planned toll rate increases until 2019 and then at five-year intervals -Plan of finance for the Metrorail debt relies on toll increases, which may result in higher elasticity and traffic diversion than foreseen, though toll rates will remain significantly lower than the Dulles Greenway which connects to DTR at western end -Plan of finance also relies on continued contributions from funding partners, with $1.082 billion or 19% of total project costs remaining to be received. The second installment of $100 million was receievd from the Commonwealth on June 24, 2015

-Higher than currently expected costs for Phase 2 could lead to more debt supported by the DTR or higher or more frequent rate increases than currently forecast, though none are currently expected -Open flow of funds allows transfers to Metrorail project and Virginia Department of Transportation (VDOT), but only after paying all DTR operating needs and all debt service, including all required reserves and reasonable discretionary reserves for all liens is paid. No transfers are expected to be needed RECENT DEVELOPMENTS DTR's 2015 toll revenue through April increased 0.6% compared to the same period in 2014, meanwhile expenses decreased 1.6% and net operating income went up 5% over 2014 numbers Transactions for the toll road were at 97.1% of forecast mostly weather-related closures early in the year, nevertheless are up 1.2% compared to 2014 and forecasted to be up 1.6% this year. DTR's repair and capital budget is strong and on target with HNTB's independent life-cycle capital cost estimates of $44.3 million as of December 31, 2014. Capital projects are funded with funds on hand and annual excess toll revenue and no additional bonds are required. Fiscal year 2014 revenues increased 17% for the toll road due to a toll rate increase, the fifth consecutive year of planned toll increases to fund Dulles Metrorail project. Expenditures increased $9 million due to increased snow removal costs, fees paid to the ETC contractor for processing, also an increase in materials and supplies compared to FY 2013. Toll transactions dropped 2.2% from 2013, consistent with forecast expectations. ETC now accounts for 83.1% total toll revenue collections, up from 80.7% in 2013. The Metrorail project had a cost increase of $76 million in Phase 1 due to detected safety and reliability issues. The authority is correcting these items and incorporating them into Phase 2 as lessons learned. As a result, the schedule for Phase 2 has been extended 13 months. The DTR's allocable share of the increase is $57 million and the funding partners are responsible for making up the remainder. The project construction contingency account of $551 million is expected to cover the overrun and no additional debt is anticipated. However, under the TIFIA agreement, the DTR may issue up to $150 million in additional project debt without TIFIA approval. The toll road received its second $100 million installment of $300 million from Virginia Department of Transportation on June 24, 2015, as scheduled. Phase 1 of the project opened for passenger service on June 26, 2014. Final closeout of the Phase 1 Design-Build Contract is anticipated to occur by December 31, 2015. In 2011, the toll road was brought to the federal district court to decide whether tolls established by the authority constitute taxes or user fees. In June 2014, a petition was filed for the US Supreme Court to hear another case regarding the governing structure of the authority. In May of this year, the US Solicitor General filed a brief in which the US opposed the petition but it is likely that the Supreme Court will make a decision soon, perhaps before the end of June. All prior lawsuits challenging the authority's use of tolls as taxes have been unsuccessful and no additional challenges are expected. DETAILED RATING RATIONALE REVENUE GENERATING BASE The DTR is 13.43 mile road completed in 1984 by the Virginia Department of Transportation (VDOT) to provide local access to interchanges between the Capital Beltway (I-495) and Washington Dulles International Airport. The DTR is located in the Dulles Corridor, which also carries the Dulles Airport Access Highway and in its median is the location of the Dulles Corridor Metrorail Project. The DTR has 4-lanes in each direction and provides access to well-established and growing activity centers in the Northern Virginia region, such as Tysons Corner, the Reston- Herndon area, Dulles International Airport and eastern Loudoun County. The DTR has been operating for 30 years. It has one mainline and 19 exit ramp toll collection plazas. With the latest toll increase implemented Jan 1, 2014 rates for a full length trip are about 26 cents per mile. DTR traffic is approximately 75% commuter vehicles on weekdays. Few non-congested free flow alternatives exist and no major significant improvements are currently planned, though untolled Route 7 as well as several parallel roads provide some competition (Interstate-66;US Route 29; US Route 50;State Route 236). FINANCIAL OPERATIONS AND POSITION Prior to 2010 DTR had only one toll increase in 2005 which was a 50% increase of $0.25. Between 2010 and 2014 toll rates increased annually in order to generate revenues to support the Metrorail project debt. Meanwhile, the average annual drop in transactions was 2.4% from 2010-2013. Fiscal year 2014 transactions dropped 2.2% versus 2.3% forecasted. Since 2008 DTR's toll revenue has doubled due to rate increases, with a cumulative 11%

reduction in transactions. However, transactions are forecasted to increase 1.6% in FY 2015 despite a slow start to the year due to weatherforced road closures. Thus far in 2015, transactions are up 1.2% yet despite the improvements in transactions, revenues are up only 0.6% compared to the forecasted 3.7%. Liquidity In addition to fully funded DSRFs DTR has unrestricted cash and investment of over $211 million, equal to 1,818 days cash on hand and up from $121 million in 2013. Its cash and equivalents balances are expected to remain stable in 2015. DEBT AND OTHER LIABILITIES DTR has four liens outstanding including, $198 million of first senior bonds; $1,380 million of second senior bonds; $150 million of subordinate debt and $1,278 million of its junior TIFIA loan for a total of $3.006 billion of debt outstanding. In addition, the authority has a $300 million commercial paper (CP) program backed by a reimbursement agreement with JP Morgan with $164.455 million outstanding as of December 31, 2014. The CP program is being used as interim financing for the project. Including the program, there is $3.3 billion of outstanding debt. Debt Structure The debt is back loaded. The authority is highly levered. Debt-Related Derivatives None Pensions and OPEB The financial impact of unfunded and OPEB obligations of this issuer are minor and thus not currently a major factor in our assessment of its credit profile. MANAGEMENT AND GOVERNANCE MWAA is a public body politic and corporate, established in 1986 with the consent of the Congress of the United States by legislation adopted by the District of Columbia and the Commonwealth of Virginia. The authority consists of a 17 member Board of Directors with 7 appointed by the Governor of Virginia subject to confirmation by the Virginia General Assembly, 4 are appointed by the Mayor of the District of Columbia subject to confirmation by the Council of the District of Columbia, 3 are appointed by the Governor of Maryland, and 3 are appointed by the President of the United States with the advice and consent of the United States Senate. Members serve staggered six-year terms. KEY STATISTICS -KEY INDICATORS Type of System: Established, Single-asset toll road. DTR is a 13.4 mile toll road located between I-495 and VA Route 28, adjacent to Dulles Airport. The road provides access to well established and rapidly growing activity centers in the Northern Virginia region, such as Tysons Corner, the Reston-Herndon area, Dulles Airport and eastern Loudoun County. -Transactions, FY 2014: 96.5 million -Revenue, FY 2014: $148.7 million -Annual Transaction Growth, 2013-14: -2.2% -Annual Revenue Growth, 2013-14: 17% -Forecasted Minimum Debt Service Coverage, First Senior Bonds: 12.35x -Forecasted Minimum Debt Service Coverage, Second Senior Bonds: 1.74x

-Forecasted Minimum Debt Service Coverage, Subordinate Bonds and TIFIA: 1.25x Please see our Government Owned Toll Roads Rating Methodology for more information about the limitations inherent to grids. METHODOLOGY SCORECARD FACTORS: -Factor 1 - Asset Type: Baa -Factor 1 - Operating History: Aaa -Factor 1 - Competition: Baa -Factor 1 - Service Area Characteristics: Aaa -Factor 2 - Annual Traffic: A -Factor 2 - Traffic Profile: Aaa -Factor 2 - Five-Year Traffic CAGR: Ba -Factor 2 - Ability and Willingness to Increase Toll Rates: Aa -Factor 3 - Net Revenue DSCR: A -Factor 3- Debt/Operating Revenue: Caa -Factor 4 - Capital Needs: -Factor 4 - Limitations to Growth: Baa -Scorecard Outcome Before Notching: A -Notching Factors --0.5 Notch for open loop -1.0 Notch for more than 720 Days Cash on Hand -Scorecard Indicated Rating: A2 OBLIGOR PROFILE The VDOT transferred the operation of the toll road to MWAA, which has been the operator of the toll road since October 1, 2009. MWAA's purpose in operating the toll road includes financing the construction of the Metrorail in the Corridor using toll road revenue to support the sale of bonds. LEGAL SECURITY The TIFIA loan is secured by a fourth lien on net revenues of the DTR. The first senior lien bonds are secured by a first lien on net system revenues; the second senior lien bonds by a second lien and the subordinate lien by a third lien. The flow of funds is open and excess funds may flow to the Virginia Department of Transportation (VDOT) after all required indenture deposits are made; however, MWAA expects all funds will be retained for the DTR, or the Metrorail Project. Per the funds flow, DTR revenues are deposited to the Revenue Fund and applied in order of priority to the Operating and Maintenance (O&M) Funds (including O&M, Reserve and Emergency Operation and Maintenance Reserve Accounts); Extraordinary Maintenance and Repair Fund and then to pay first senior lien debt service and DSRF deposits; second senior lien debt service and second senior lien DSRF deposits; subordinate lien debt service and subordinate lien DSRF deposits; junior lien bonds (expected to be TIFIA); Arbitrage Rebate Fund; Renewal and Replacement Reserve Fund; Dulles Corridor Enterprise Reserve and Toll Rate Stabilization Fund (DCE Reserve); Capital Improvements Fund; Metrorail Project Fund, Latent Defects Reserve Fund (up to $20 million maximum for defects of Metrorail Project),Transit Operations Fund and finally to the Remaining Toll Road Revenues Fund. After substantial completion of the project a portion of the DCE Reserve may be used to pay current TIFIA interest if net toll revenue is not sufficient and 50% of any remaining amounts in the DCE Reserve must be used to prepay TIFIA with the balance available to the authority.

The rate covenant and additional bonds test (ABT) for the liens are: First senior lien bonds: 2.00x Maximum Annual Debt Service (MADS) First and second senior lien bonds: 1.35x Annual Debt Service (ADS) First and second senior lien bonds and subordinate lien bonds: 1.20x ADS All bonds: 1.20x ADS including all other obligations secured by toll road revenues The DSRF requirement is cash funded at the lesser of 10% par; 125% average annual debt service (AADS) or 100% maximum annual debt service (MADS) for first, second senior bonds and subordinate bonds and at 10% of the outstanding balances of the TIFIA loan. TIFIA loan agreement has been authorized under DTR's existing bond indenture through the 10th supplemental indenture. The plan of finance assumes use of the authority's existing $300 million commercial paper program to provide interim project funding to be repaid from draws on the TIFIA loan as needed. USE OF PROCEEDS Not applicable. ISSUER CONTACT: Andrew T. Rountree, Vice President for Finance and Chief Financial Officer, 703-417-8710 RATING METHODOLOGY The principal methodology used in this rating was Government Owned Toll Roads published in October 2012. Please see the Credit Policy page on www.moodys.com for a copy of this methodology. REGULATORY DISCLOSURES For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Analysts Maria Matesanz Lead Analyst Public Finance Group Moody's Investors Service Chee Mee Hu MANAGING_DIRECTOR Public Finance Group

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