NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an 'AA-' rating to the Port Authority of New York and New Jersey (PANYNJ)'s $400 million 186 series and $250 million 187 series consolidated bond issuances.
Proceeds from the 186 series issuance are expected to refund the $302.41 million outstanding balance of the 138 series consolidated bonds and to provide just under $100 million new money available for capital expenditure. Proceeds from the 187 series issuance are expected to provide additional funds for capital investment.
Fitch has also affirmed the ratings for the authority's existing debt as follows:
--$19.00 billion in outstanding 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.
The Rating Outlook for the authority's consolidated bonds is Stable.
KEY RATING DRIVERS
The ratings are supported by PANYNJ's mature, diverse and monopolistic asset base which notably includes certain very strong airport and bridge/tunnel assets and are further supported by the authority's conservative debt structure and moderate leverage, with debt service coverage ratio (DSCR) expected to be managed at or above 1.8x. Nevertheless, its extensive capital plan and guardianship of significantly loss-making assets constrain the rating.
Revenue - Volume: Stronger
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 - Price: 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. However, this flexibility may 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.
Infrastructure & Renewal: Midrange
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.
Debt Structure: Stronger
Conservative Capital Structure: The authority maintains a nearly 100% fixed-rate, fully amortizing capital structure.
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.
Although Fitch rates several other multi-sector issuers in the U.S. transportation infrastructure sphere, none have a similar level of asset diversity as, and few are of a similar scale to, PANYNJ. Furthermore, none of its closest peers face a similar multijurisdictional ownership or governance structure. The closest peers are Port of Seattle (senior lien rated 'AA'/Stable Outlook) and Massachusetts Port Authority (senior revenue bonds rated 'AA'/Stable Outlook), both of whose debt is secured primarily on airport and port revenue streams. PANYNJ's diverse and high profile asset base is a relative strength; however, significantly higher leverage and risk associated with its large capital plan coupled with its highly politicized operating environment place its ratings one notch below senior lien ratings for both peers.
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.
PANYNJ is issuing consolidated bonds series 186 and 187 to refund outstanding series 138 bonds and to provide additional funds for capital improvements. For more information on the authority and its recent performance, please refer to Fitch's press release dated June 13, 2014 titled 'Fitch Rates Port Authority of New York & New Jersey's Consolidated Bonds 'AA-''.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance' (July 12, 2012);
--'Rating Criteria for Toll Roads, Bridges, and Tunnels' (Aug. 20, 2014);
--'Rating Criteria for Ports' (Oct. 3, 2013);
--'Rating Criteria for Airports' (Dec. 13, 2013).
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