NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the 'A' rating on the $1.225 billion New York Liberty Development Corporation, series 2011 liberty revenue bonds. The Rating Outlook is Stable.
The bonds bear interest only for the first 15 years with principal amortization beginning in 2027. The series 2011 liberty bonds are fixed-rate bonds and mature in 2051 with an optional 10-year call at par. The 'A' rating reflects the financial support provided to the credit from the Port Authority of New York and New Jersey (PANYNJ, senior consolidated bonds rated 'AA-'/Stable Outlook) in the form of its guarantee of debt service and from New York City (NYC, general obligation bonds rated 'AA'/Stable Outlook) in the form of the city space lease. Fitch considers both NYC's and PANYNJ's respective obligations with respect to 4 World Trade Center, LLC (4 WTC) as being subordinate to the debt obligations of each agency, and this is reflected in the rating on the series 2011 liberty revenue bonds.
The bonds were raised in order to partly finance the construction of Tower 4 as part of PANYNJ's overall objective to complete the redevelopment of the World Trade Center site.
KEY RATING DRIVERS
STRONG SUPPORTING ENTITIES: Strong financial support is offered to bondholders by highly rated entities in PANYNJ and NYC.
VISIBLE AND CRITICAL PROJECT: The project is highly visible and critical with broad based political support.
SPECIAL OBLIGATIONS OF PANYNJ: Tower 4 (T4) bond payments are special obligations of PANYNJ and contractual in nature, which Fitch views as weaker than direct debt of the PANYNJ.
CITY LEASE PAYMENTS SUBJECT TO APPROPRIATION: NYC's rental payment is subject to appropriation through agency budgets and is treated in a manner similar to a 'space lease' obligation versus a debt obligation in Fitch's analysis.
Positive or Negative: Improvement or decline in the general credit profile of either or both PANYNJ and NYC.
The T4 facility and the site upon which it is being constructed are owned by PANYNJ, a municipal corporate instrumentality and political subdivision of the states of New York and New Jersey. T4 is leased by PANYNJ to 4 WTC, a Silverstein related-entity, under a lease having a 99-year term that commenced in 2001. As landlord, 4 WTC leased approximately 600,000 gross rentable square feet of T4 to PANYNJ as a tenant pursuant to the amended and restated lease dated Nov. 16, 2006 for a term of 30 years. In addition, approximately 582,000 gross rentable square feet in T4 has been leased to NYC pursuant to the city space lease. The construction timetable currently calls for substantial completion of T4 in the fourth quarter of 2014 with PANYNJ and NYC expected to have fully moved in to their space by the end of 2015.
PANYNJ's Tower 4 annual debt service payments will be made from net revenue deposited in the consolidated bond reserve fund (CBRF), which is the same source of payment used to fund debt service obligations on PANYNJ's subordinate versatile structured obligations (VSOs). Although PANYNJ has refunded all of its VSOs, the junior lien remains open with a historical and prospective 1.15x additional bonds test. Obligations paid out of the CBRF have no priority of payment or ranking, and there are no negative covenants insulating the Tower 4 annual debt service payments. Fitch believes the nature of the obligation is weaker than direct debt of the authority and any future subordinate debt service would likely receive priority of payment.
The liberty bonds are secured by T4 annual debt service payments made by PANYNJ in the amount of annual debt service less monthly fixed rent amounts payable by NYC under the city space lease dated March 7, 2008, taking into account permitted offsets, credits and abatements to the bond trustee.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance', July 12, 2012;
--'U.S. Local Government Tax-Supported Rating Criteria', Aug. 14, 2012.
Applicable Criteria and Related Research:
Rating Criteria for Infrastructure and Project Finance
U.S. Local Government Tax-Supported Rating Criteria