Hudson Yards Infrastructure Corp., the developer of a 45-block business and residential project on Manhattan's west side, won a two-notch upgrade from S&P Global Ratings.

S&P said on Friday that it upgraded its rating on the developer's outstanding Fiscal 2012 Series A first-indenture senior revenue bonds to AA-minus from A.

At the same time, S&P said it assigned A-plus long-term and underlying ratings to Hudson Yards' $2.15 billion of Fiscal 2017 Series A tax-exempt- and Series B taxable second-indenture revenue bonds which are coming to market this week and next. The outlook is stable, the agency said.

Construction continues at Hudson Yards on Manhattan's West Side.
Construction continues at Hudson Yards on Manhattan's West Side. Chip Barnett

"The upgrade on the series 2012 series A first-indenture senior revenue bonds reflects increased debt service coverage from multiple revenue streams pledged for repayment, as well as a closed first indenture," S&P analyst Anne Cosgrove said in a press release. “We also note there has been significant development activity in Hudson Yards since the project's inception. HYIC has not had to rely on city interest support payments in fiscal years 2016 and 2017 and we expect recurring and nonrecurring revenues to be sufficient over the next few years to cover debt service.

"The Series 2012 A first-indenture senior revenue bonds are being converted to principal amortizing with level debt service and a 2047 final maturity; the conversion is triggered by the two prior fiscal years' recurring revenues equaling at least 1.25x maximum annual debt service (MADS) coverage.

"The rating on the fiscal 2017 series A and B second-indenture revenue bonds reflects our opinion of strong recurring pledged revenues for debt service payment, as well as interest support payments from New York City that will remain available, subject to annual appropriation, to cover any interest shortfalls on the unrefunded first-indenture and series 2017 bonds," Cosgrove said.

The Hudson Yards Development Area extends from West 29th and West 30th streets on the southern end, 7th and 8th avenues on the east, West 43rd Street on the north, and 11th and 12th avenues on the west.

The redevelopment of Hudson Yards is designed to allow for the expansion of the Midtown central business district, as well as for the realization of the development potential of Manhattan's Far West Side.

"The outlook is stable and we do not see the rating changing in the two-year outlook horizon," Cosgrove said, "and in our opinion, the accelerated pace of redevelopment is consistent with HYIC's ability to pay principal and interest on the bonds from recurring pledged and nonrecurring revenues."

S&P added that the stable outlook is based on its expectation of continued development of the HYIC, as well as growth in recurring revenues.

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Chip Barnett

Chip Barnett

Chip Barnett is a journalist with more than 40 years of experience. Barnett is currently Senior Market Reporter for The Bond Buyer.