The Port Authority of New York and New Jersey is scheduled to auction $400 million of its consolidated bonds on Wednesday.
Approximately $5.5 million of the proceeds form the Series 172 bonds will be used to fund capital projects at the authority’s airports and ports and about $394.5 million will refund outstanding consolidated bonds. The bonds to be refunded will be disclosed after the notices of redemption are published, a spokesperson said.
The authority has around $15.5 billion of outstanding consolidated bonds.
Like all but one of its consolidated bond issues last year, the new bonds will be offered competitively.
With maturities from 2013 to 2037, the fixed-rate bonds will be secured by net revenues from all authority facilities and by the Consolidated Bond Reserve Fund and the General Reserve Fund, which must be funded at 10% of par value of all obligations of the authority, under both New York and New Jersey statutes.
As of Dec. 31 the General Reserve Fund balance was $1.7 billion and met the required amount, according to the preliminary official statement. The bonds will be subject to redemption.
Fitch Ratings has assigned a AA-minus rating to the bonds, with a stable outlook. Moody’s Investors Service rates them Aa2 with a negative outlook. Standard & Poor’s has not yet rated the bonds, but assigned a AA-minus to its outstanding consolidated bonds.
Moody’s cites the authority’s near monopoly control over vital transportation infrastructure — including airports, rail, ports and bridges — and continued favorable financial performance as strengths.
The rating agency said its negative outlook continues to reflect a slow economic recovery, exposure to increased fiscal stress in New Jersey and New York — which it rates Aa3 and Aa2, respectively — and debt and commercial risks associated with the rebuilding of the World Trade Center site.
The 90-year-old bi-state agency, which issued approximately $1.67 billion in consolidated bonds for construction at the WTC last year, has been criticized for overspending on the site.
“This elevated level of spending for the site is estimated to continue in 2012, with the authority budgeting approximately $2 billion in order to substantially complete the rebuilding efforts,” Fitch said in a report.
The rating agency added that the authority expects to lower capital spending to approximately $1.45 billion in additional bonds.
After last year’s controversial toll increase and audits critical of agency spending and management, the authority’s management, led by executive director Patrick Foye, has recently been taking steps toward reform.
Last week the authority’s Board of Commissioners voted to cut compensation and benefits in order to save over $41 million in the next 18 months.
Moody’s said that significant cost escalations in the development of the WTC site could negatively pressure the rating, while continued successful delivery of WTC site components — on schedule and within its budget — could stabilize the rating outlook.