Fitch Ratings has assigned an ‘AA-‘ rating to the Port Authority of New York and New Jersey’s (the authority) $500 million of consolidated bonds 146th series (alternative minimum tax). The bonds sole competitively on Dec. 6, 2006. Bond proceeds will be applied to fund various capital plan projects.
At the same time, Fitch affirms the ratings and the following outstanding debt of the authority:
–$8.8 billion consolidated bonds at ‘AA-‘;
–$350.0 million consolidated notes at ‘F1+’;
–$519.6 million versatile structure obligations (VSO) at ‘A+/F1+’.
Consolidated bonds and notes are secured by net revenues of the authority and a pledge of the general reserve and consolidated bond reserve funds. VSOs, which are secured by numerous bank standby bond purchase agreements, also benefit from a subordinate pledge of the consolidated bond reserve fund. The Rating Outlook for all long-term securities is Stable.
The ‘AA-‘ and ‘F1+’ ratings reflect the strong demand for New York/New Jersey-based travel, supported by the region’s expanding economy and status as a global center of commerce; the authority’s expansive, diverse portfolio of transportation and commerce-related assets; institutionalized practices and fiscal conservatism; consistently healthy financial performance and debt service coverage, bolstered by the cost recovery nature of use agreements in place primarily at the airports, cost control, and timely toll increases; and significant balance sheet liquidity.
Primary credit concerns include the likelihood of increased financial leverage and reduced liquidity as a result of very large near term financial commitments made by the authority to projects at the World Trade Center (WTC) site and the recently announced Trans-Hudson Express Tunnel Project (THE) and increased reliance on the operations of the three metropolitan New York and New Jersey airports to subsidize non-income generating assets and support capital investment required as a result of the authority’s broad mission. In Fitch’s view, the ability of the airports to continue subsidizing such non-self-supporting endeavors will be challenging.
Fitch expects the authority’s recently accelerated pace of debt issuance to continue through at least the intermediate term given its commitments, which are subject to the approval of the board of commissioners among other conditions to fund portions of the redevelopment of the WTC site, notably the Freedom Tower and projects comprising the WTC memorial, and its intention to fund portions of the THE. The availability of federal grant monies and in the case of WTC site projects, the availability of insurance proceeds and recovered third party funds will influence the timing and amount of any additional debt.