With uncertainty surrounding the financing of the $5 billion Tappan Zee Bridge project, rating agencies have assigned negative outlooks to the New York State Thruway Authority’s revenue bonds.

The outlooks come ahead of next week’s $1.1 billion bond sale by the country’s largest toll highway system.

Proceeds will retire $868 million of bond anticipation notes that mature in July, and will also go toward funding a portion of the cost of the authority’s $1.5 billion multi-year capital program, which does not include the Tappan Zee Bridge project.

The new bonds will mature in 2014 through 2032, 2037 and 2042, and will be subject to redemption.

Citi is lead underwriter. Hawkins Delafield & Wood LLP is bond counsel and Public Resources Advisory Group and Acacia Financial Group, Inc. are financial advisors.
Moody’s Investors Service affirmed its A1 rating on the revenue bonds, but lowered the outlook to negative from stable.

The agency cited risks associated with the financing of the Tappan Zee bridge project, which the authority expects to finance mostly with debt.

“The negative outlook also reflects the potential impact on financial performance as the authority doubles or triples its debt load in the face of very limited volume growth,” Moody’s analysts said in a report.

The rating agency also said that implementation of substantial additional toll increases beyond 45% will be required to maintain targeted debt-service coverage ratios.

A recent traffic engineer’s report said the authority’s debt-service coverage ratios could drop to as low as 0.97 times by 2016, which is well below its bond resolution requirement of at least 1.2 times.

Last month, the Thruway Authority’s board directed that staff take necessary actions to implement toll adjustments for commercial vehicles with more than two axles.

A 45% increase has been proposed and any toll adjustments are scheduled to go into effect on Sept. 30.

Based on the potential lower coverage ratios, in addition to uncertainty about the Tappan Zee, Standard & Poor’s had also revised the Thruway’s outlook to negative from stable last week. The agency affirmed its A-plus rating.

The authority has said it would finance the new bridge through toll-backed debt and is also seeking federal funding, but further financing details have not been released.

According to the preliminary official statement for next week’s deal, the Thruway Authority expects to have a final design and cost for the project by the end of 2012.

The authority announced savings of an estimated $452 million in costs for the project by reaching an agreement with 14 labor organizations.

Gov. Andrew Cuomo, who has made building a new bridge a priority, said the agreement will allow thousands of New York’s working men and women to secure good jobs building a new, safer bridge.

“This agreement will save taxpayers hundreds of millions of dollars, while putting in place important protection for our workers,” Cuomo said.

“For too long we have talked about replacing the Tappan Zee, and we cannot wait any longer,” he said.

Provisions in the agreement include a standardized 40-hour straight-time work week, giving workers that arrive one hour before their shift $25 a day rather than an hour of overtime, and standardized holidays.

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