September 25, 2012 / 8:38 PM / in 8 years

TEXT-Fitch rates Port Authority of N.Y., N.J. bonds 'AA-'

Sept 25 - Fitch Ratings assigns an 'AA-' rating to the Port of Authority of
New York and New Jersey's (the authority) $2 billion consolidated bonds, series
174.

Fitch also affirms the authority's existing debt as follows:

--$16.2 billion in consolidated bonds at 'AA-';
--Commercial paper (CP) notes, series A (AMT) (tax-exempt) at 'F1+', authorized
up to $300 million;
--CP notes series B (Non-AMT) (tax-exempt) at 'F1+', authorized up to $200
million;
--$300 million consolidated notes, series ZZ (federally taxable) at 'F1+'.

The Rating Outlook on all PANYNJ obligations is Stable.

KEY RATING DRIVERS

--Resilient Cash Flows And Stable Revenue Base: The authority has a monopolistic
position over an expansive, diverse portfolio of transportation and commerce
related assets, including four metropolitan New York/New Jersey airports, an
interstate transportation network (tunnels, bridges, terminals, and ferries),
and seaports. Strong demand characteristics for these commerce related assets
are underpinned by the region's diverse and populous economy as well as its
status as a global center for economic activity.

--High Degree Of Rate-Setting Flexibility: The authority has demonstrated an
ability to produce consistently healthy financial performance reinforced by the
cost recovery nature of use agreements in place primarily at the airports and
timely toll increases.

--Conservative Capital Structure: The authority maintains a nearly 100%
fixed-rate capital structure.

--Moderate Leverage Levels And Strong Coverage Ratios: Leverage levels are
moderate at 8.1x net debt to cash available for debt service (CFADS) and are
expected to decline as the authority slows capital borrowings. The moderate
leverage position is partially offset with significant balance sheet liquidity,
legally required reserve levels, ability to control operating and maintenance
costs, and a demonstrated history of generating debt service coverage ratios
(DSCRs) over 2.0x.

--Established Asset Base With Reinvestment Needs: The authority's broad base of
long-established infrastructure assets results in an approximately $25 billion
capital plan, though recent completed audit reports indicate capital needs may
be significantly greater than presently expected over the next 10 to 15 years.
Fitch will continue to review developments with respect to the authority's
capital program, specifically the authority's attention to maintenance of the
asset base as well as expected leverage levels.

WHAT COULD TRIGGER A RATING ACTION

--Weaker financial margins due to slow revenue growth and/or higher rates of
growth in operating expenses;

--Significant escalation in expected capital needs and additional leveraging not
supported by commensurate revenue increases to maintain DSCRs at or above
1.8x-2.0x;

--Actions by either the State of New York or New Jersey to limit the authority's
ability to raise tolls to cover growing debt service obligations.

SECURITY

Consolidated bonds and notes are secured by net revenues of the authority and a
pledge of the general reserve and consolidated bond reserve funds.

TRANSACTION SUMMARY

The consolidated bonds offered will be fixed rate with a final maturity in 2062
and are expected to be offered via negotiation on or around Sept. 28. The
relatively long tenor of the bonds is matched to the long asset life of the
capital improvements underway at the World Trade Center (WTC) site. While
approximately $1.5 billion in bond proceeds will be used for capital projects at
the WTC site, the balance will be applied toward refinancing the authority's
outstanding 145th series of bonds for debt service savings and refinancing the
authority's outstanding series ZZ short-term notes.

The authority's strong margins largely reflect a stable revenue profile, even
during the most recent recession, and an ability to grow revenues to meet
escalating debt service obligations. Consistent with past performance, the
authority posted healthy financial results in 2011, primarily supported by a
partial-year toll rate adjustment implemented in September 2011 and on-going
tight control over operations and maintenance expenses. In 2011, debt service
coverage per the indenture was a robust 3.11x, in line with historical results
and an increase from 2.73x in 2010. Through August 2012, authority gross
operating revenues are reported to be running approximately $28 million below
expectations while operating expenses are tracking above budget by approximately
$29 million. Fitch will continue to monitor operating performance.

The September 2011 multi-phased toll and PATH fare increase should allow the
authority to maintain its financial profile while continuing with its complex
and costly capital plan. The authority recently released the results of the
audit process requested by the governors of New York and New Jersey and the
findings indicate a significant amount of capital needs are on the authority's
horizon, though some flexibility in the undertaking of these projects is likely.
Fitch notes that the authority has started to slow debt amortization and
moderately backload principal repayment; however, it is Fitch's expectation that
the authority will continue to adjust its levels of capital spending to generate
DSCRs consistent with the current rating. Should future authority capital plans
call for a marked changed in the authority's leverage or historically solid
liquidity levels, downward pressure on credit quality would be likely.

A key ongoing risk to the credit is the authority's funding participation in
redevelopment of the WTC site. In 2011, the authority issued approximately $1.67
billion in consolidated bonds on construction and rebuilding efforts at the
site. This elevated level of spending for the WTC site is estimated to continue
in 2012, with the authority budgeting approximately $2 billion in order to
substantially complete the rebuilding efforts. Due to the high priority of this
project, the authority has deferred certain capital projects at LaGuardia
Airport (LGA), Newark Liberty International Airport (EWR), and the Port
Authority's Bus Terminal although the revision to the plan will likely
accelerate projects for these facilities.


Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance' (Aug. 16, 2011);
--'Rating Criteria for Toll Roads, Bridges, and Tunnels' (Aug. 5, 2011);
--'Rating Criteria for Ports' (Sept. 29, 2011);
--'Rating Criteria for Airports' (Nov. 28, 2011).

Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
Rating Criteria for Toll Roads, Bridges, and Tunnels
Rating Criteria for Ports
Rating Criteria for Airports
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below