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I AGREE
20 Sep 2012
State's stable outlook applies to current issues and about $282 million of similarly secured South Jersey Port Corporation debt
NOTE: On March 15, 2016, the press release was corrected as follows: In the paragraph regarding methodologies, the publication date of Moody's Approach to the Moral Obligation Pledge was changed from June 1999 to November 2008. Revised release follows.
New York, September 20, 2012 --
Moody's Rating
Issue: Marine Terminal Revenue Refunding Bonds, Series 2012
Q; Rating: A1; Sale Amount: $58,990,000;
Expected Sale Date: 9/27/12; Rating Description: Revenue:
Government Enterprise
Issue: Marine Terminal Revenue Refunding Bonds, Series 2012
R (AMT); Rating: A1; Sale Amount: $16,750,000;
Expected Sale Date: 9/27/12; Rating Description: Revenue:
Government Enterprise
Opinion
Moody's Investors Service has assigned an A1 rating to New Jersey's $75.7
million of Marine Terminal Revenue Bonds, Series 2012 Q and 2012
R(AMT), to be issued by the South Jersey Port Corporation.
The outlook is stable, reflecting the state's stable outlook.
The bonds, which are scheduled for competitive sale on September
27, will partially refund outstanding Series 2002 K and Series 2002
L bonds for savings that will be concentrated in the next two fiscal years.
The debt service savings will primarily benefit the state, by reducing
the expected appropriations to replenish the corporation's debt service
reserve fund.
SUMMARY RATING RATIONALE
The A1 rating reflects the State of New Jersey's commitment, as
defined in the corporation's enabling act and resolution, to annually
appropriate and transfer to the port amounts sufficient to restore the
debt service reserve fund to the required level (equivalent to maximum
annual debt service). Because these transfers require annual legislative
appropriation, the rating is notched off of the state's general
obligation bond rating, which is Aa3. The A1 rating is also
supported by the state's demonstrated commitment to make these appropriations,
given its 30-year history of replenishing the corporation's reserve
fund; the state's history of including appropriation language in
the budget, which is historically adopted well in advance of the
corporation's December 1 request date, and the state's non-impairment
pledge.
New Jersey's Aa3 general obligation rating reflects a relatively weak
financial position and the expectation that recovery is unlikely in the
medium term, because of rapidly rising fixed costs, a relatively
slow economic recovery, and the absence of a plan to rebuild fund
balances. Pension and other post-employment benefit (OPEB)
liabilities will continue to grow rapidly, further pressuring the
already high-debt state. Revenue growth will be moderate,
as employment continued to decline well after national job growth resumed,
and economic recovery is projected to lag the nation slightly.
There is no specific plan to rebuild liquidity and fund balance.
The Aa3 rating also incorporates the state's broad, diverse economy
and high resident wealth levels, as well as the governor's powers
to reduce expenditures.
STRENGTHS
-- Strong state commitment to annually replenish the port's
debt service reserve fund to the required level of maximum annual debt
service, subject to annual appropriation
-- History of timely state appropriations to replenish the
port's debt service reserve fund since 1972
-- State pledge not to impair corporation's obligations
to bondholders
-- Requirement that state approve all additional port borrowing
CHALLENGES
-- Impact of adverse economic conditions on port's
cargo levels, mitigated by long-term lease agreements
-- Higher levels of state appropriations reflecting the
increase in corporation debt
-- State's weakened financial position and structurally
imbalanced operations that are challenged by high fixed costs of debt,
pension and other post-employment benefits
-- Annual legislative appropriation requirement for state
to replenish ports debt service reserve
RATING METHODOLOGY
The principal methodology used in this rating was Moody's Approach to
the Moral Obligation Pledge published in November 2008. Please see
the Credit Policy page on www.moodys.com for a copy of this
methodology.
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Edward Hampton
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Baye Blakeslee Emery Larsen
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Moody's assigns A1 rating to New Jersey's $75.7 million of Marine Terminal Revenue Refunding Bonds, Series 2012 Q and 2012 R (AMT) to be issued by the South Jersey Port Corporation
No Related Data.
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