The Port Authority of New York and New Jersey is selling $350 million of bonds subject to the alternative minimum tax Wednesday.
The series 177 consolidated revenue bonds will be sold competitively.
Moody’s Investors Service rates the bonds Aa3 with a stable outlook and Fitch rates them AA-minus with a stable outlook. Standard & Poor’s has not rated the series separately but has an AA-minus rating on the authority.
The bonds carry maturities from July 2014 to January 2043. The Port Authority will have the right to redeem the bonds from January 2023 onwards.
About $110 million of the bonds is new money to be used for capital projects. The remainder is for the refunding of bonds and commercial paper.
The bonds are secured by a pledge of the Port Authority’s net revenues, the authority’s general reserve fund, and the consolidated bond reserve fund.
While the authority does not have an outside financial advisor, it has retained Darrell Buchbinder of New York City as bond counsel.
Fitch pointed to several factors to explain its AA-minus rating.
The authority has a monopoly over crucial New York City transportation assets, Fitch senior director Kenneth Weinstein noted. Among these are five airports, tunnels, bridges, terminals, ferries, and seaports. Demand to use these facilities has been strong, Weinstein wrote.
Additionally, the authority has a great deal of flexibility in setting rates, Weinstein wrote.
The Port Authority has a conservative capital structure, with nearly all of it fixed-rate.
Its leverage levels are moderate and its coverage ratios are strong, Weinstein observed.
Moody’s pointed to somewhat different set of factors in explaining its Aa3 rating.
The authority has enjoyed a trend to positive financial results recently, wrote Moody’s lead analyst Maria Matesanz, and has built up large reserve balances.
It has experienced steady growth in usage and “inelastic demand” at facilities despite historical crises.
The authority also is benefiting from recent toll and fare increases.
Matesanz wrote that she expects “strong” debt service coverage ratios to continue.
On the other hand, Matesanz noted that the authority does not yet have a finalized capital improvement plan, though this is expected this quarter. The plan could add $17 billion in needs to the $27 billion already identified by an earlier report. This increase in capital spending needs “will likely pressure financial operations and weaken metrics,” in the coming years, Matesanz wrote.
