New York, October 28, 2016 -- Issue: Consolidated Bonds, One Hundred Ninety-Eighth Series; Rating: Aa3; Rating Type: Underlying LT; Sale Amount: $350,000,000; Expected Sale Date: 11/01/2016; Rating Description: Revenue: Government Enterprise;
Issue: Consolidated Bonds, One Hundred Ninety-Seventh Series; Rating: Aa3; Rating Type: Underlying LT; Sale Amount: $432,755,000; Expected Sale Date: 11/01/2016; Rating Description: Revenue: Government Enterprise;
Summary Rating Rationale
Moody's Investors Service has assigned a Aa3 to the Port Authority of New York and New Jersey's (PANYNJ, or authority) Consolidated Bonds, One Hundred Ninety-Seventh Series($433 million) and One Hundred Ninety-Eighth Series ($350 million). Moody's maintains the Aa3 rating on all outstanding parity consolidated bonds. The outlook is stable.
The Aa3 rating recognizes the authority's near monopoly control over critical transportation infrastructure in its large and economically diverse service area and a trend of favorable financial results. The rating also considers the large and unparalleled $27.6 billion, 10-year capital plan that focuses on financing transportation assets rather than non-core development projects. The credit profile of the authority is evolving given the now approximately equal amounts of net operating revenue available for debt service from aviation and toll facilities versus the historic higher proportion of aviation net revenues. Given the contracted nature of revenues from both the World Trade Center (WTC) and member ports, and the deficit operations of the PATH system, aviation revenues and toll revenues are now the primary sources of operating revenues whose rate raising ability are directly controlled by the authority. To reflect the higher importance of toll revenues, we now apply both the airport and toll road rating methodologies equally in our credit analysis as detailed below.
The stable outlook is supported by strong and relatively stable financial metrics and Moody's expectation of continued economic growth in the New York/New Jersey region. We assume there will not be any significant additions to the authority's capital plan over the next two years that could exert pressure on the authority's credit metrics.
Factors that Could Lead to an Upgrade
Strong traffic growth at the authority's toll facilities
Total debt service coverage ratios (DSCRs) well above 2.0 times
Construction completion of WTC facilities on-time and within budget with lease-up above baseline projections
Factors that Could Lead to a Downgrade
Revisions to the capital plan that postpone critical and timely maintenance of key revenue generating assets
Addition of significant non-revenue generating projects to the capital plan
Sustained total DSCRs below 2.0 times and reduction of historic liquidity
Any reorganization of the authority that effectively reduces the consolidated revenue pledge of all facilities
Net revenues of the authority and all amounts in the two reserve funds. Bondholders are protected by a sum sufficient rate covenant. The additional bonds test requires 1.3 times MADS coverage on consolidated bonds. There is no dedicated debt service reserve fund.
Use of Proceeds
The proceeds of the new issue will be used to refund the One Hundred Forty-Sixth series consolidated bonds, to fund capital expenditures in connection with facilities of the authority and/or to refund certain other of the authority's obligations.
The PANYNJ is a municipal corporate instrumentality and political subdivision of the states of New York and New Jersey. The purpose of the authority is to provide transportation, terminal and other facilities of commerce within the Port District. The states have given the PANYNJ certain abilities, including the ability to borrow money upon its bonds or other obligations, to establish charges for the use of such facilities and to exercise the right of eminent domain to authorize specific transportation and terminal facilities.
The authority operates all the interstate vehicular tunnels and bridges in the port district which, together with the Port Authority Bus Terminal, PATH and the Trans-Hudson Ferry service, constitute the authority's interstate transportation network. The bridges and tunnels include the Holland Tunnel, Lincoln Tunnel, George Washington Bridge, Bayonne Bridge, the Goethals Bridge, and the Outerbridge Crossing.
The authority also leases or owns five airports to serve the port district. These include John F. Kennedy International Airport, LaGuardia Airport, Newark Liberty International Airport, Teterboro Airport and Stewart International Airport. Airlines at the three large airports are required to pay a flight fee to the authority for ongoing construction, design, operation and maintenance of certain aircraft facilities. Newark's airline agreement expires in 2018. JFK's and LaGuardia's agreements do not expire until the end of 2023. The airports collect Passenger Facility Charges (PFCs) at the federally established rate of $4.50. LGA has four terminals while JFK consists of six individual airline passenger terminals. EWR handles passengers in three terminals.
The WTC, located on the lower west side of Manhattan, will provide approximately 10 million square feet of above grade office space with associated storage, mechanical floors, and below-grade parking and consists of five towers including One World Trade Center, about 500,000 square feet of retail space, a WTC Transportation Hub, and a memorial and interpretative museum.
The authority also owns or operates six marine terminal facilities to serve the Port District. Revenues primarily come from fixed lease agreements. The six facilities include Port Newark, Elizabeth-Port Authority Marine Terminal, Greenville Yard, Port Jersey in Bayonne and Jersey City, N.J, Brooklyn Port Authority Marine Terminal and Howland Hook Marine Terminal.
The methodologies used in this rating were Publicly Managed Airports and Related Issuers published in November 2015 and Government Owned Toll Roads published in October 2012. Please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
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