Port Authority of N.Y., N.J. affirmed ahead of $1.08 billion refunding

The Port Authority of New York and New Jersey will bring affirmations of its AA-minus level ratings to its next bond deal.

The authority plans to sell $1.08 billion of bonds, according to a preliminary official statement published Thursday.

Ity plans to issue two tranches, Series 242 for $535 million and Series 243 for $545 million, to refund two previously issued consolidated series, according to offering documents. The pricing is expected in September.

The negotiated deal is managed by BofA Securities with Frasca and Associates as municipal advisor. The Bank of New York Mellon is trustee. Orrick Herrington & Sutcliffe is disclosure and bond counsel; the bonds are exempt from federal income tax and state income tax in New York and New Jersey.

Fitch said its AA-minus rating reflects the authority’s strong credit profile and financial flexibility and pointed to recovery across key sectors, including bridges and tunnels, aviation, and port facilities that underpinned positive revenue growth following ridership collapse during the COVID-19 pandemic.

“All key business lines have achieved a full recovery in traffic volumes and are on pace to maintain revenue growth over the medium term,” Fitch said. “The ratings also reflect the authority’s strong oversight of operating and capital costs during the pandemic and post-pandemic periods, when traffic volumes and operating revenues were adversely impacted.”

The Port Authority’s scope includes the New York region’s three major airports, major toll bridges and tunnels linking New York and New Jersey, its major seaport and a rapid transit rail line linking the two states.

Lockdown orders initiated during the COVID-19 pandemic resulted in an estimated $3 billion in revenue losses, but since then the Authority’s passenger levels have inched closer to pre-pandemic norms.

Fitch said the Authority’s bottom line had also benefitted from “strong airport cost recovery in airline use agreements and proactive toll increases on its bridges and tunnels with minimal impact on traffic levels. “

The Authority’s three major airports, Newark Liberty, LaGuardia, and John F. Kennedy International, saw travel rates surpass the previous record, set over the first half of 2019, by around one million, it said in July, while traffic at bridges and tunnels is at pre-pandemic levels while total PATH train ridership stood at 62 % of pre-pandemic levels.

Fitch said the Authority has also “demonstrated strong execution on its major capital needs, especially for the airports, which are expected to drive revenue growth under the port’s cost recovery agreements.”

The Authority is amid a 10-year capital plan overhauling a wide array of infrastructure including its regional airports backed by a mix of pay-as-you-go funding and debt.

It has already sold $37 billion in bonds to support capital work started in 2017, and in its most recent budget bumped capital spending by $719 million, to $2.9 billion for fiscal year 2023.

Moody’s Investors service affirmed the authority ahead of the deal at Aa3 with a stable outlook.

“The Aa3 rating benefits from the essentiality of the Port Authority’s infrastructure assets for the New York and New Jersey metro area,” the rating agency wrote. “Moody’s expects that the Port Authority’s operating revenue will remain on a positive trend in 2023 supported by an increase in aviation revenue and the recent CPI-based toll rate increase in January 2023.”

S&P Global affirmed its AA-minus rating and stable outlook.

“The rating reflects our expectation that the PANYNJ’s enterprise risk and financial risk profiles will remain extremely strong and strong, respectively,” said S&P analyst Joe Pezzimenti.