Fitch Affirms New York Liberty Development Corp Liberty Revenue Bonds at 'AA-'

NEW YORK--()--Fitch Ratings has affirmed the 'AA-' underlying rating on the New York Liberty Development Corporation's (NYLDC) $672.48 million liberty revenue bonds (tax-exempt) series 1WTC-2011. The bonds have a final maturity in 2043. Bond proceeds were used to purchase the Port Authority of New York and New Jersey's (PANYNJ) 170th series consolidated bond (rated 'AA-'; Stable Outlook by Fitch), the proceeds of which will be used to fund construction costs at One World Trade Center (1WTC).

The credit profile and Rating Outlook of the NYLDC bonds are tied directly to the rating on PANYNJ consolidated bonds. The Outlook is Stable.

KEY RATING DRIVERS FOR PANYNJ BONDS

Resilient Cash Flows and Stable Revenue Base: PANYNJ 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 comprising tunnels, bridges, terminals, and ferries, as well as seaports. Strong demand characteristics are underpinned by the region's diverse and populous economy as well as its status as a global center for commerce. Revenue - Volume: Stronger

High Rate-Setting Flexibility: The authority has demonstrated an ability to produce consistently healthy financial performance, reinforced by strong cost recovery provisions in airline use agreements at airports and timely toll increases on its bridges and tunnels with minimal impact on traffic levels. This flexibility may, however, come under pressure if World Trade Center rental revenues do not develop as expected, or if operating losses on Port Authority Trans-Hudson (PATH) transit network widen significantly. Revenue - Price: Stronger

Extensive Debt-Funded Capital Plan: PANYNJ's 2014-2023 capital plan totals approximately $27.6 billion. Cost and delay risk are meaningful for a plan of this scale and complexity. These risks would be further compounded if PANYNJ was mandated by either state to take on additional non-core, non-revenue generating assets that could reduce future funding capacity for these capital works. Infrastructure & Renewal: Midrange

Conservative Capital Structure: The authority maintains a nearly 100% fixed-rate, fully amortizing capital structure. Debt Structure: Stronger

Moderate Leverage, Strong Coverage: Leverage is moderate, with 2014 net debt to cash available for debt service (CFADS) expected to be 7.1x (excluding cash in the general fund). Significant balance sheet liquidity, reserving requirements, ability to control operating and maintenance costs, and a demonstrated history of generating DSCR over 2.0x all mitigate leverage and support the rating.

RATING SENSITIVITIES FOR PANYNJ BONDS

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

Negative - 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;

Negative - The generation of lower revenue than currently forecast from the World Trade Center site that puts increased pressure on airport and bridge and tunnel assets to meet the revenue shortfall;

--Negative - 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;

--Negative - Significant new non-core state-mandated investment that impacts future core-investment capability;

Positive - None at present.

TRANSACTION SUMMARY

PANYNJ requested NYLDC to issue liberty revenue bonds in order to finance a portion of the construction costs associated with 1WTC, thus allowing for the use of tax-exempt financing under the Liberty Bond Program, which expired at the close of 2011. NYLDC is a not-for-profit corporation and has no employees or business operations. All NYLDC bonds issued have been done on behalf of other obligors. Given this, Fitch views the risk of an involuntary bankruptcy filing by the NYLDC as consistent with the rating assigned. The bonds issued by NYLDC are non-recourse, special, and limited obligations of NYLDC payable only from revenues received from PANYNJ. All right in these payments has been assigned to the trustee.

PANYNJ is responsible for the construction of 1WTC and remains the principal owner. 1WTC construction was completed earlier in 2014, and approximately 56 percent of the commercial office space has been leased. Principal tenants have taken handover of leased space and are currently fitting it.

For more information, please see Fitch's press release on the port authority dated June 13, 2014, available at www.fitchratings.com.

SECURITY

The bonds are special obligations of NYLDC and are secured by the trustee's right, title, and interest in the consolidated bond and bond fund. PANYNJ's consolidated bonds are secured by net revenues of PANYNJ and a pledge of the general reserve and consolidated bond reserve funds.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012).

Applicable Criteria and Related Research:

Rating Criteria for Infrastructure and Project Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682867

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=848075

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Contacts

Fitch Ratings
Primary Analyst
Saavan Gatfield, +1 212-908-0542
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Chad Lewis, +1 212-908-0886
Senior Director
or
Committee Chairperson
Scott Zuchorski, +1 212-908-0659
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Saavan Gatfield, +1 212-908-0542
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Chad Lewis, +1 212-908-0886
Senior Director
or
Committee Chairperson
Scott Zuchorski, +1 212-908-0659
Senior Director
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com