NYSTA bonds get S&P 'A+' although outlook 'negative'

June 13, 2012
By Peter Samuel

The New York State Thruyway Authority is getting a strong 'A+' rating from Standard & Poor for an important issue of longterm toll revenue bonds, although the rater is revising its outlook for the Thruway to 'negative.'

A statement today: "The outlook revision reflects what we believe is the potential for lower debt service coverage (DSC) 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," Standard & Poor's credit analyst
Joseph Pezzimenti is quoted.

The strong 'A+' rating however reflects the importance of the Thruway, the lack of toll-free alternatives, the competitive toll rates and "ample rate setting flexibility" and historically strong debt service coverage.

S&P add: "The negative outlook reflects our 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 DSC and liquidity near current levels, while also taking into account the funding of the Tappan Zee project and ongoing capital needs, we could revise the outlook to stable within our two-year outlook period.

"We 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."

Navigant


NYSTA's recent management was subjected to heavy criticism in a review commissioned from Navigant Financial Advisors for 'kicking the can' of hard decisions, using short-term debt inappropriately and allowing a serious erosion of profit margins. The board of directors have already adopted the 45% increase in truck toll rates and plan to implement them this fall.

http://www.standardandpoors.com/prot/ratings/articles/en/us/?articleType=HTML&assetID=1245335161644

TOLLROADSnews 2012-06-13

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