Fitch Rates Port Authority of New York & New Jersey Bonds

The 'AA-' and 'F1+' ratings are supported by the authority's expansive, well-managed and diverse portfolio of transportation and commerce-related assets, including the three metropolitan New York/New Jersey airports.


NEW YORK--(BUSINESS WIRE)--April 17, 2006--Fitch Ratings assigns an 'AA-' rating to the Port Authority of New York and New Jersey (the authority) $500 million of consolidated bonds, 143rd series (alternative minimum tax). The bonds, which are expected to sell competitively on April 19, 2006, mature on April 1, 2036. Interest on the bonds is payable semi-annually each April 1 and Oct. 1, beginning on Oct. 1, 2006.

Fitch also affirms the 'AA-' and 'F1+' ratings on outstanding consolidated bonds ($8.1 billion) and consolidated notes ($400 million), respectively. The Rating Outlook is Stable for the consolidated bonds.

The 'AA-' and 'F1+' ratings on the consolidated bonds and notes are supported by the authority's expansive, well-managed and diverse portfolio of transportation and commerce-related assets, including the three metropolitan New York/New Jersey airports, an interstate transportation network (tunnels, bridges, terminals and ferries) and area seaports, consistently strong financial performance, and debt service coverage, and strong liquidity. The Stable Rating Outlook reflects the proven ability of the authority's assets, even under very challenging operating environments, to generate net revenues sufficient to service debt obligations.

Primary credit concerns include the increasing financial call on the authority's airport assets to support non-self-supporting initiatives required as a result of the authority's broad mission and bi-state mandate, and the continuing challenges facing the authority throughout redevelopment of the World Trade Center (WTC) site. In Fitch's view, these risks are partially mitigated by the sizable revenue-generating capacity of the authority's asset base, which lends stability to both financial margins and debt service coverage. Increased rent payments for both La Guardia Airport and John F. Kennedy International Airport made by the authority under a renegotiated lease with the city of New York are partially offset by higher airline rates and charges collected by the authority under cost-recovery-based use and lease agreements at both facilities (Freedom Agreements).

During 2005, the authority recorded a 30% operating margin, consistent with prior years, with net revenues of $913 million generated on $3 billion of gross operating revenues. Debt service coverage equaled approximately 2.2 times (x) during 2005, up from 1.8x during 2004. Coverage levels were above the authority's typical range (1.7x-1.8x) as a result of a decreased debt issuance and the authority's first-time usage of passenger facility charge (PFC) revenue to offset eligible debt service costs. The authority is budgeting for 1.73x coverage in 2006, reflecting an increase in consolidated bond and note issuance to support the $1.8 billion capital plan. Fitch notes the authority has been historically conservative in its budgeting and thus faces reasonable upside in its forecasts. Total reserve fund balances, which are pledged to the repayment of consolidated bonds and notes, remained relatively unchanged during 2005 (approximately $1.6 billion), equaling 19% and 16% of outstanding consolidated bonds and notes and total obligations (excluding special project bonds), respectively.

Some uncertainties linger as the authority participates in the redevelopment of the WTC site. Fitch continues to monitor the financial implications of any jury verdict that determines how the destruction of the WTC should be defined under the various property damage and business interruption insurance policies ($3.5 billion combined single limit per occurrence) carried by the net lessees of One, Two, Four, and Five WTC and the retail components of WTC (net lessees). In addition to settlements previously received, the net lessees received a positive verdict on Dec. 6, 2004 at a trial which defined the attacks of September 11, 2001 as two separate events, resulting in combined $2.2 billion insurance recoverable. In Fitch's view, future jury decisions that limit the recovery of insurance proceeds could affect development activities at the WTC site and possibly result in net lessees attempting to restructure leases with the authority. To date, the net lessees remain current on lease payments to the authority. However, the verdicts rendered in April and May of last year are on appeal.

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