The Port Authority of New York and New Jersey plans a $400 million sale of new money and refunding bonds by competitive bid on Wednesday.
The consolidated Series 169 bonds will provide funding for port and airport capital projects as well as possible refunding of about $200 million of outstanding parity bonds. The 169th series is structured with amortization from 2012 through final maturity in 2041.
The Port Authority in August approved a set of multi-phase toll and fare increases that supporters say was necessary to backstop infrastructure projects and the agency’s access to capital markets. Fitch Ratings in a report called the capital plan “complex and costly.”
Last week, New York Gov. Andrew Cuomo named Patrick Foye executive director of the authority, replacing Christopher Ward. Foye, with a long background in public governance, had been Cuomo’s deputy secretary of economic development. The authority’s board of commissioners confirmed the appointment, also last week.
In addition, Cuomo announced that the authority would take control of the Moynihan Station project from the Empire State Development Corp. The project involves the expansion of Pennsylvania Station into the James Marley Post Office building across the street on Manhattan’s West Side.
The bi-state agency operates several New York-area bridges and tunnels, the region’s airports, and the Port Authority Trans-Hudson, or PATH, railway system, in addition to redevelopment of the World Trade Center site.
Moody’s Investors Service rates the consolidated bonds Aa2, while Fitch and Standard & Poor’s have each assigned AA-minus ratings.
“In part, the ratings reflect our opinion that [the authority’s] financial performance and liquidity are strong, and that its operations are diverse,” S&P analyst Joseph Pezzimenti said in a report.
Still, the authority has come under fire as its real estate holdings, particularly at the World Trade Center, have become a financial strain and what Fitch termed “a key ongoing risk to the credit.” Its 10-year capital plan includes $6 billion for World Trade Center reconstruction.
Fitch added: “Cost overruns at the WTC and decreased demand for the authority’s transportation facilities could lead to a downward trend in the authority’s reserve levels.”
Meanwhile, its infrastructure is aging. The capital plan, which the Port Authority pared last summer by $5 billion to $25.1 billion at the time of the toll and fare hikes, includes $1.5 billion for a new Goethals Bridge, $1 billion for raising the Bayonne Bridge roadway to accommodate bigger ships, $700 million for fixing the George Washington Bridge cables, and $100 million for reworking the Lincoln Tunnel helix.
Overall, the authority has $15.6 billion of outstanding debt.
“We could lower the ratings if PANYNJ’s liquidity and financial margins erode considerably,” Standard & Poor’s said. “We do not expect to raise the ratings during the next two years due to the authority’s significant additional debt needs.”
Moody’s last January changed the authority’s outlook to negative, which officials and commissioners cited during the toll- and fare-hike debates. They said the agency needed the additional revenue to ensure its continued access to the capital markets.
Next week, the authority and developer Larry Silverstein plan to sell $1.3 billion of Series 2011 Liberty revenue bonds, through the New York Liberty Development Corp., to complete the 4 World Trade Center project, one of two towers rising on the site of the Sept. 11, 2001, terrorist attacks. The Liberty Development Corp. is a subsidiary of the Empire State Development Corp.
The Port Authority’s board approved a financing plan at last Thursday’s meeting. The bond deal has been pulled twice due to the tenuous state of the municipal market, once in December and again in April. The authority owns the land to Tower 4, and has leased the building to Silverstein Properties Inc.
"We appreciate the Port Authority's efforts to resolve technical issues raised by its bondholders," Janno Lieber, president of Silverstein Properties affiliate World Trade Center Properties, said in a statement. "[The] board action will assure successful financing of 4 World Trade Center, which remains on schedule to be completed and open in 2013. Equally important, it demonstrates the continued strength of the partnership the Port Authority and Silverstein have forged to maintain the tremendous momentum of the World Trade Center rebuilding effort."
Last month, the Port Authority sold $1 billion of taxable 40-year bonds to finance World Trade Center reconstruction.
