NEW YORK - Standard & Poor's Ratings Services said it has revised its outlook on New York State Thruway Authority's (NYSTA) general revenue bonds outstanding to negative from stable.
At the same time, Standard & Poor's assigned its A-plus long-term rating to NYSTA's general revenue bonds, series I. Standard & Poor's also affirmed its A-plus long-term rating on the authority's general revenue bonds outstanding. In addition, Standard & Poor's affirmed its SP-1-plus short-term rating on NYSTA's general revenue bond anticipation notes (BANs), series 2011A, maturing in July 2012.
The outlook revision reflects the potential for lower debt service coverage if the authority does not obtain formal board approval in September this year to increase commercial vehicle tolls 45%. "Uncertainty related to NYSTA's plan of finance and long-term tolling strategy related to the replacement of the Tappan Zee Bridge and ongoing capital needs also contributed to the outlook revision," said Standard & Poor's credit analyst Joseph Pezzimenti.
The rating reflects the following positive credit factors: the essentiality of the 570-mile thruway system, the largest in the U.S., serving 37 of New York's 62 counties and a majority of the state's population; limited competition from toll-free alternatives; competitive tolls relative to those of other regional authorities, providing ample rate-setting flexibility; and historically strong debt service coverage, which has been no lower than 1.75x from fiscals 2009-2011.
NYSTA is issuing the series I bonds to redeem the series 2011A BANs and provide additional capital funding.
The authority, the largest toll system in the U.S., is a 570-mile superhighway system crossing the state. The thruway's route from the New York City line to the Pennsylvania line is 496 miles long and includes a 426-mile mainline connecting the state's two largest cities, New York City and Buffalo.
The negative outlook reflects concern that the timing and magnitude of revenue enhancement and operational streamlining initiatives might not be enough to offset NYSTA's significant additional debt needs, making it difficult to maintain financial margins consistent with the ratings.
If the authority is able to implement an aggressive tolling regime that we believe will allow it to maintain debt service coverage and liquidity near current levels, while also taking into account the funding of the Tappan Zee project and ongoing capital needs, the agency could revise the outlook to stable within its two-year outlook period.
S&P said it will likely lower the rating if the plan of finance for the Tappan Zee project and ongoing capital needs produce a financial risk profile consistent with a lower rating.