S&P Global Ratings Thursday upgraded the New Jersey Turnpike Authority’s turnpike revenue bonds to AA-minus from A-plus.
“The upgrade reflects our view of NJTA's financial and operational resilience through different economic cycles and during the COVID-19 pandemic; and demonstrated rate-setting flexibility, which we view as consistent with a higher rating,” S&P credit analyst Joe Pezzimenti said in a release.
The rating action comes in connection with the authority's planned sale of $100 million of Series 2022A and $849 million of Series 2024A revenue bonds. The outlook is stable.
Credit strengths include a very strong market position, extremely strong service area economic fundamentals and expected continued strong finance performance, the agency said.
S&P said these strengths were offset by the potential for coverage to become pressured, given the turnpike authority's reliance on annual toll rate increases to maintain financial margins as it issues additional debt, which is projected to be $4.7 billion between 2022 and 2026. These funds will finance capital needs to maintain and expand the system and to make annual payments to the state from the authority's operating cash flow.
“The stable outlook reflects our expectation that as passenger and commercial traffic continue to recover and normalize, the authority will adjust revenues, expenses, and capital spending as needed to maintain financial metrics consistent with an overall strong financial risk profile,” S&P said.
The authority operates the 148-mile New Jersey Turnpike System and the 173-mile Garden State Parkway.
In January, Moody's Investors Service upgraded the NJTA's senior lien rating to A1 from A2. Moody's has a stable outlook on the credit.
Moody's said its upgrade reflected the credit positive impact of the NJTA's new annual toll indexation policy, the better-than-expected traffic and revenue rebound from the pandemic driven declines, increased clarity on the pace of new debt to be issued to fund new capital investments, and a signed new multi-year subordinate transfer agreement with the state.
"The upgrade also incorporates the improvement in the credit profile of the owner, the State of New Jersey (general obligation A3, positive), as Moody's revised the state's credit outlook to positive from stable in July 2021 after revising the outlook to stable from negative in April 2021 owing to the state's better than anticipated financial position and improved governance profile," Moody's said.
