Fitch Ratings has assigned a ‘AA-‘ rating to the Port Authority of New York and New Jersey’s (PANYNJ) proposed issuance of $600 million of series 248 consolidated revenue bonds. The Rating Outlook is Stable.
RATING RATIONALE
The rating reflects PANYNJ’s well positioned credit profile, anchored by its mature, diverse and monopolistic transportation infrastructure asset base, which provides critical services to the New York City metro area. The authority has maintained a high degree of financial flexibility while managing and dedicating resources to its very large transportation focused capital plan.
PANYNJ has built significant liquidity to allow for increased pay-go funding to limit future debt borrowings for capital needs over the near term. Longer term, risks surrounding the future phases of the capital program, may necessitate increased borrowings. The rating on the senior lien is supported further by a conservative debt structure. Under Fitch’s rating case, senior net leverage averages 6.5x and the senior debt service coverage ratio (DSCR) averages 2.0x over the five-year period through 2029, which are financial metrics consistent with the ‘AA’ category for transportation enterprises.
KEY RATING DRIVERS
Revenue Risk – Volume – High Stronger
Major Economic Center, Resilient Revenue Base
PANYNJ’s portfolio of monopolistic, expansive and diverse transportation and real estate assets includes the four metro New York airports, interstate road, rail and ferry Hudson River crossings, and seaport terminals. The region’s diverse and populous economy as well as its status as a global center for commerce support resilient demand and pricing power. Facility utilization across most of the operations, except the PATH interstate rail service, has fully recovered from the pandemic. As a very mature regional economic center, activity volume is likely to grow at a modest rate over time.
Fiscal 2024 results show continued strength in volume activities highlighted by an 11% increase in port cargo and 13% rise in PATH ridership. The airport volumes rose nominally in 2024 over 2023 results with international traffic leading the performance gains. Toll bridge and tunnel traffic was largely flat and consistent with pre-pandemic crossing volumes despite toll hikes during this period.
Revenue Risk – Price – Stronger
Proven Rate-Setting Flexibility
PANYNJ has significant controls over most tolls, fees and other end-user charges across the system of operations. The authority benefits from strong airport cost recovery in airline use agreements and proactive toll increases on its bridges and tunnels with minimal impact on traffic levels. Adjustments to user rates and tolls over time could influence regional economic activity, and therefore PANYNJ is somewhat limited despite its apparent economic flexibility. Still, the authority benefits from numerous commercial agreements that provide for strong cashflows, and certain key tolls and fares are automatically adjusted to inflationary indices.
Infrastructure Dev. & Renewal – Midrange
Extensive & Growing Capital Plan
PANYNJ’s current capital plan for years 2017 through 2026 totals approximately $37 billion to support key airport and rail projects as well as bridges and tunnel works and a replacement bus terminal, amongst others. Projects primarily focus on rehabilitating or reimagining existing assets rather than on expansion, with some projects having limited financial recovery.
The agency prudently scaled back capital spending during 2020 and 2021 due to the pandemic. Recent fiscal periods and the 2025 budget indicate a spending level consistent with current long-term capital program strategies. The midtown bus replacement project is one of the larger elements with this program and will take about seven years to complete all major phases. Redevelopment at the agency airports is also a critical area of the capital program that has a strong private sector engagement for project delivery.
Long-term risks to the capital program remain since it may be subject to increases over time. However, these risk factors are mitigated by the port’s proven history of finding collaborative funding models, including the use of innovative project delivery models such as public private partnerships, support from key city and state government stakeholders, and a well-balanced funding mix for the port’s own capital plan contributions of debt, pay-go capital and grant funding.
Debt Structure – 1 – Stronger; Debt Structure – 2 – Midrange
Conservative Capital Structure – Debt Structure 1 – Stronger
The senior lien consolidated bonds, including the recently effected TIFIA loan for the midtown bus station replacement project, benefit from their nearly 100% fixed-rate, fully amortizing capital structure with a robust covenant package and strong dedicated liquidity. The consolidated bonds further have the security from the general reserve fund, set to an amount equal to 10% of the par value of all outstanding bonds.
Financial Profile
PANYNJ’s operating results in fiscal 2024 build on the solid recovery in 2023 with gross operating revenues growing 5.8% to $7.0 billion, up $387 million from the same period in fiscal 2023. This increase was due to a combination of increased volume for most transportation divisions including aviation, ports, and PATH as well as fee/toll increases (inflation escalations and discount adjustments) and rising cost recovery payments.
The authority’s liquidity remains robust, with surplus funds rebuilding the general reserve fund and consolidated bond reserve fund to over $5.0 billion, well over 400 days cash on hand. Fiscal 2024 results were favorable given the operating performance with Fitch calculated senior coverage at 2.4x and leverage at 4.7x. Leverage under Fitch’s rating case is assumed to average 6.5x on the senior lien through 2029, with debt service coverage maintained at 2.0x on average, even when considering anticipated borrowings to support the capital program.
PEER GROUP
PANYNJ’s closest peers are Port of Seattle (AA/AA-/Stable) and Massachusetts Port Authority (Massport; AA/Stable), both of which rely on airport and port revenue streams. Total leverage for the Port of Seattle’s is similar to PANYNJ in the 7x range under the rating case and aligned at the ‘AA-‘ rating level, while Massport’s leverage declines to below 4x over the medium term, which is reflected in the one-notch higher rating.
PANYNJ’s diverse and high-profile asset base is a significant strength; however, it still faces longer-term risks around its capital plan, with certain high-profile projects not yet finalized. This could lead to cost increases and pressure financial metrics relative to peers.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
–Activity reductions and revenue losses across the authority’s transportation assets;
–Financial deterioration leading to sustained leverage above 10x for a prolonged period.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
–Improved clarity around long-term capital & financing plans, following expiration of the 2017-2026 CIP, showing a healthy balance of funding sources;
–Total leverage levels stabilized below 7x under Fitch’s rating case.
TRANSACTION SUMMARY
PANYNJ is planning to issue its consolidated bonds, series 248th for a total par amount of approximately $600 million. Bond proceeds will be allocated with approximately $300 million for new money purposes coupled with about $300 million towards the refinancing of PANYNJ’s outstanding 189th series consolidated bonds. The proposed transaction is expected to be fixed rate obligations with a final maturity in 2055. The refunding portion of the transaction is expected to generate $19 million in net present value savings with no maturity extension from the proposed refunded bonds (final maturity in 2045).
SECURITY
The consolidated bonds, the 1 World Trade Center bonds, as well as the recently executed federal loan for the Midtown Manhattan bus replacement project are all secured by a senior pledge of authority revenues as well as funds held in the general reserve and consolidated reserve funds. Other Port Authority obligations including the 4 World Trade Center bonds are secured by New York City rental payments and the payment obligations from the Port Authority that are subordinate to the pledge to the consolidate bonds. The payments due for the Goethals Bridge project are similarly secured by payment obligations from the Port Authority that are subordinate to the pledge to the consolidate bonds.
Date of Relevant Committee
10-Mar-2025
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of ‘3’, unless otherwise disclosed in this section. A score of ‘3’ means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch’s ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision.
PARTICIPATION STATUS
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.
Source: Fitch Ratings