The Port Authority of New York and New Jersey plans to auction $400 million of 171st Series consolidated bonds to support capital projects.
The deal is expected to be the largest competitive transaction for the week.
The bond maturities will run from 2030 to 2042.
Standard & Poor’s and Fitch Ratings assign double-A minus ratings to the bonds, while Moody’s Investors Service rates them Aa2.
Moody’s assigned a negative outlook last year, based on stagnant growth in the New York City area and risk from development of the World Trade Center reconstruction in lower Manhattan. The move prompted concern among authority officials about access to the capital markets.
The other agencies’ outlooks are stable.
Standard & Poor’s based its rating on the authority’s diverse operations, strong liquidity, and expectation that debt service will remain strong.
“We could lower the ratings if the authority’s liquidity and financial margins erode considerably. We do not expect to raise the ratings during the next two years due to the authority’s significant additional debt needs,” analyst Joseph Pezzimenti said.
The 90-year-old bi-state agency, which last month approved a preliminary $7.1 billion combined operating and capital budget for fiscal 2012, has come under fire for what critics say is overspending on the new World Trade Center.
The authority has about $13 billion in outstanding debt. It takes in roughly $3.5 billion in annual revenues generated from the George Washington, Goethals, Bayonne and Outerbridge Crossing bridges, the Lincoln and Holland tunnels, New York City’s three primary airports, the Port Authority Trans-Hudson light rail and train systems to New Jersey and the Port Authority Bus Terminal in Manhattan.
Janney Capital Markets called the authority “the epitome of an essential-service provider,” citing the near-monopoly position it enjoys, along with the Metropolitan Transportation Authority, which runs New York City’s subway system and most of the region’s commuter rail.
Capital projects include $2.7 billion for upkeep, which includes replacing the cables on the George Washington Bridge and renovating the Lincoln Tunnel helix, $1 billion to replace the Goethals Bridge, and $545 million to enhance bus service operations at its namesake bus terminal at 42nd Street.
In August, the authority’s board of commissioners approved a series of toll and fare increases. Moody’s had cited economic stagnation in the service area, and the port agency’s exposure to the stress of two state governments. In addition, the increased debt of the authority’s capital plan will add further stress, Moody’s said.
“People will be watching what will happen with the new tolls, regarding the revenue being predicted, and what the Port Authority will do with the money,” said Jameson Doig, a Dartmouth College business professor and author of a book about the authority, “Empire on the Hudson.”
While approving the fare hikes in August, governors Andrew Cuomo of New York and Chris Christie of New Jersey insisted on an audit of the agency’s finances.
Cuomo selection Patrick Foye, who took over as executive director in October, has two governors tugging at him. Christie was recently quoted as saying he would like to “get his arms around” the agency.
According to Doig, pushback from the toll increases, which the American Automobile Association is challenging in court, and revelations of hidden employee perks, such as lifetime free EZ-Pass crossings, have given political leaders ammunition. “That’s opened the window,” Doig said.