The New Jersey Turnpike Authority is selling $1.4 billion in revenue bonds this week, with final pricing scheduled Wednesday.
The authority adopted a 10-year, $7 billion capital program in 2008. After the authority sold bonds in 2009 and 2010 to support this program, the series 2013A bonds are the sale for the program.
Among the projects in the capital program are the widening of the New Jersey Turnpike between interchanges 6 and 9, the widening of the Garden State Parkway between the Atlantic City Expressway and Toms River, safety improvements on the parkway in Monmouth and Ocean counties, and facility improvements on both the parkway and the turnpike.
The bond sale is part of a strategy to have level debt service payments from 2019 forward once the $7 billion is fully funded, said authority spokesman Thomas Feeney.
The authority does not plan to sell any additional new money bonds in the next 12 months. However, it will probably sell about $800 million in refunding bonds in May.
The series 2013A bonds were offered to retail Tuesday before institutional pricing Wednesday.
They carry serial maturities from 2016 to 2033 plus maturities in 2038 and 2043. More than half the principal will mature in those last two years.
The authority expects that the series 2013A bonds maturing in 2024 or later will be eligible to be called at par in July 2022.
The bonds are rated A by Fitch Ratings, A-plus by Standard & Poor’s and A3 by Moody’s Investors Service.
Debt service will primarily be financed through highway tolls.
JPMorgan is the senior manager. Wolff & Samson PC is the bond counsel and First Southwest is the financial advisor.
Fitch noted how critical the turnpike and parkway are to both inter- and intra-state transportation. Fitch director Emari Wydick expects that these roads will have slow long-term traffic growth.
The authority also has solid financial metrics, Wydick wrote. The authority has an ample 428 days cash on hand. The authority’s debt-to-cash flow available for debt service is approximately 10 times, which is comparable the level of its peers, Wydick wrote.
Each year the authority’s surplus revenues are transferred to the state government. However, the authority’s bond requirements are senior to the transfers, Wydick wrote.
Moody’s points to some similar factors to explain its A3 rating. Among the negative factors for the authority are its delayed amortization of outstanding debt, the fact that 40% of the cost of the authority’s $7 billion capital improvement program has not been funded, and a weaker than standard debt service reserve fund, wrote Moody’s lead analyst Maria Matesanz.
If the authority’s senior lien rating was downgraded below Baa2, it would be required to post collateral on its uninsured swaps or owe a termination fee.
“A downgrade below this level could result in a substantial drain on the authority’s liquidity,” Matesanz wrote.
In its report, S&P discussed many of the same factors as Moody’s and Fitch. The authority charges relatively low tolls of 11.4 cents per mile on the turnpike and 4.8 cents per mile on the parkway, S&P credit analyst Adam Torres wrote. This gives the authority flexibility to raise rates on either road and particularly on the parkway, he wrote.