The Hudson Yards Infrastructure Corp. plans a $1 billion sale of senior revenue bonds through negotiated bid Wednesday after a one-day retail period, primarily to fund the extension of New York City’s No. 7 subway line.
JPMorgan will serve as lead manager for the fiscal 2012 Series A bond issuance, the final maturity of which is Feb. 15, 2047.
Proceeds will finance some of the costs related to various projects undertaken in relation to development of the Hudson Yards district in west central Manhattan, notably the westward expansion from Grand Central Terminal of the No. 7 line, which originates in Queens, to a new station at 11th Avenue and W. 34th Street, near the Jacob K. Javits Convention Center.
Fitch Ratings and Standard & Poor’s have rated the bonds A, while Moody’s Investors Service has assigned an equivalent A2.
HYIC is a local development corporation the city created for the project. According to a report Fitch issued Monday, essentially all property interests required for the subway extension have been acquired and 65% of the project work is complete, including all subway tunnel excavation.
Contracts have been awarded covering 90% of the project budget, and the Series 2012A bonds are expected to provide enough funds to complete the undertaking.
The last major contract, signed in August, was awarded to a joint venture of Skanska USA and RailWorks Corp., and involves track laying and signal construction.
The extension is scheduled to open late in 2013.
The bonds will also cover the construction of a system of parks, public open spaces and streets in the 45-square-block project area, which covers West 43rd Street, 7th and 8th avenues, to 30th Street, 11th and 12th avenues.
In 2005, the city rezoned the area from mostly manufacturing and low-density commercial use to allow for medium- to high-density use, including residences, office buildings and hotels. The New York City Industrial Development Authority adopted tax incentives to encourage development.
Mayor Michael Bloomberg in 2002 had suggested a stadium at the rail yards site as a lynchpin for the city’s bid to host the 2012 Summer Olympic Games. It would also have served as a home to the New York Jets football team.
London, however, won the Olympic bid and city and state planning agencies rejected the stadium proposal.
The Jets now play in MetLife Stadium, a new facility in the New Jersey Meadowlands.
In assigning its rating, Fitch cited the midtown location and the city’s commitment to the Hudson Yards project, “most notably, its obligation, subject to appropriation, to pay interest on up to $3 billion of bonds if project revenues are insufficient for this purpose.”
Fitch rates New York City’s general obligation bond credit AA with a stable outlook.
However, the rating agency also said that key credit concerns center on the risk inherent in a security that relies on prospective development, which is subject to construction delays, competition from other projects, and fluctuations in the economy and the real estate and financial markets.
Fitch analysts also noted that the amorization structure, in conjunction with the city’s interest payment commitment, allows time for construction and development delays and the phasing out of tax incentives.
Nixon Peabody LLP is the city’s bond counsel. Orrick, Herrington & Sutcliffe LLP is special disclosure counsel to New York City, whose corporation counsel, Michael Cardozo, is also advising on certain legal matters.
