The Port Authority of New York and New Jersey plans to competitively market $300 million of federally taxable notes on Wednesday. The deal will be the largest competitive municipal debt sale since the market froze up in mid-September following the bankruptcy of Lehman Brothers.
The deal will also be the first note sale for the authority since 2006 when it sold $150 million of notes. The Port Authority consolidated notes Series ZZ will mature on Dec. 1, 2011, and are not subject to redemption prior to maturity.
"In the current market especially, it seems like shorter-term bonds are doing a little better, that the public is looking for maturities with a shorter term, and that's the reason why we decided to go with the notes," said Michael Percival, the agency's debt manager. "Also, with a three-year note, the interest rate attached to that should be significantly lower than, say, a 20-year or 25-year taxable bond, so we're also looking to limit our debt service expense."
The authority typically sells its fixed-rate debt competitively. Percival seemed unfazed by the notion of selling such a large competitive deal in the current market.
"The Port Authority is an excellent credit," he said. "We're also a very frequent issuer in the market and we feel that hopefully the market will realize that this should be a very good deal for them."
According to a Moody's Investors Service report, the authority received an average of nine bids on its last four note issues.
A large portion of the note proceeds will be used for expenses at the World Trade Center site, which is currently under construction.
Darrell Buchbinder is the authority's inhouse bond counsel.
Moody's rates the notes MIG-1 with a stable outlook and assigns the authority its Aa3 rating.
Unlike New York's Metropolitan Transportation Authority, which is struggling with budget gaps partially caused by falling revenue from dedicated taxes, the Port Authority is self-sustaining from fees it charges for its services. The authority operates four airports in the metropolitan region, commuter rail, bridges, tunnels, maritime ports, and a bus terminal in Manhattan, and owns the World Trade Center site.
Port Authority has "a very diversified stream of revenues," said Maria Matesanz, Moody's senior vice president. "Although we're seeing slight dips in usage from the bridges and tunnels, the impact of the toll increase in March is offsetting some of that decline. It has a very strong market position providing essential services in a very broad area."
Challenges include the authority's large and complex capital plan, including the redevelopment of the World Trade Center site, she said.
Fitch Ratings and Standard & Poor's assign the agency their AA-minus ratings.
The Port Authority has $11.7 billion of rated debt outstanding.
