OREANDA-NEWS. Fitch Ratings has affirmed the 'AA-' rating on the New York Liberty Development Corporation's (NYLDC) $672.48 million liberty revenue bonds (tax-exempt) series 1 WTC-2011. The bonds have a final maturity in 2043.

Bond proceeds were used to purchase the Port Authority of New York and New Jersey's (PANYNJ) 170th series consolidated bond (rated 'AA-'/Stable Outlook), the proceeds of which were used to fund construction costs at One World Trade Center (1WTC).

The rating reflects the fully pass-through nature of debt service payments on the series 1 WTC-2011 bonds to PANYNJ, reflecting the full collateralization of issued bonds with PANYNJ consolidated bonds, 170th series, whose terms mirror those of the 1 WTC-2011 bonds and which were purchased with issuance proceeds.

KEY RATING DRIVERS

Revenue Risk - Volume: Stronger

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 seaports. The region's diverse and populous economy as well as its status as a global center for commerce supports resilient demand and pricing power. Economic pricing flexibility may fall if WTC or Port Authority Trans-Hudson (PATH) transit assets underperform or if PANYNJ takes on additional loss-making assets.

Revenue Risk - Price: Stronger

Demonstrated Rate-Setting Flexibility: PANYNJ 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.

Infrastructure & Renewal Risk: Midrange

Extensive, Growing Capital Plan: PANYNJ's current 2014-2023 capital plan totals approximately $27.6 billion, although Fitch understands that a revised 2017-2026 plan is expected to be published later in the year that will reflect additional commitments relating to the Gateway Project and Port Authority Bus Terminal amongst others. Cost and delay risk are meaningful for a plan of this scale and complexity. PANYNJ's target capital investment funding balance of 60:40 cash: debt (currently around 50:50) is appropriate for its financial profile.

Debt Structure: Stronger

Conservative Debt Structure: The authority maintains a nearly 100% fixed-rate, fully amortizing capital structure, with a very healthy liquidity position.

Healthy Coverage, Moderate Leverage: DSCR is robust, expected to remain above 1.80x for consolidated bonds and 1.60x for subordinated special obligations in the Fitch rating case through 2020, which primarily reflects slower ramp-up of rental activity at the World Trade Center. Leverage is moderate, with net debt-to-cash available for debt service (CFADS) in the Fitch rating case remaining around 8.1x-8.6x at the senior level and 9.1x-9.6x at the junior level.

Peers: Closest peers are Port of Seattle ('AA'/Stable Outlook) and Massachusetts Port Authority ('AA'/Stable Outlook), both of whose debt is secured primarily on airport and port revenue streams. PANYNJ's diverse and high profile asset base is a significant strength; however, its significantly more involved capital plan coupled with a highly politicized operating environment place its ratings one notch below senior lien ratings for both peers.

RATING SENSITIVITIES

Negative: Slow revenue growth and/or higher rates of growth in operating expenses could result in negative rating pressure.

Negative: Significant escalation in capital needs and additional leverage not supported by revenue increases that cause DSCRs to remain below 1.8x/1.7x on a sustained basis at the senior and subordinated levels, respectively, or net leverage to remain above 9x or 10x for a prolonged period at the senior and subordinated levels would reflect a deterioration in PANYNJ's credit profile.

Negative: Significantly lower revenue than currently forecast from the World Trade Center site as a result of weaker rental demand, or a widening in sustained operating losses generated on the Port Authority Trans-Hudson transit network, would increase pressure on PANYNJ's other assets and could pressure the rating.

Negative: Political Intervention: Actions by either the state of New York or New Jersey to limit the authority's ability to raise tolls to cover growing debt service obligations, or significant new non-core state-mandated investment that puts additional strain on cash generative core assets, would be detrimental to PANYNJ's ratings.

Positive: None expected for the foreseeable future on account of PANYNJ's large capital plan.

SUMMARY OF CREDIT

PANYNJ requested NYLDC to issue liberty revenue bonds in order to finance a portion of the construction costs associated with 1WTC, thus allowing for the use of tax-exempt financing under the Liberty Bond Program, which expired at the close of 2011. NYLDC is a not-for-profit corporation and has no employees or business operations. All NYLDC bonds issued have been on behalf of other obligors. Given this, Fitch views the risk of an involuntary bankruptcy filing by the NYLDC as consistent with the rating assigned. The bonds issued by NYLDC are non-recourse, special, and limited obligations of NYLDC payable only from revenues received from PANYNJ. All right in these payments has been assigned to the trustee.

PANYNJ was responsible for the construction of 1WTC and remains the principal owner. 1WTC construction was completed in 2014, and approximately 68% of the commercial office space has been leased to date. Principal tenants have taken handover of leased space.

For more information, please see Fitch's new issue report on PANYNJ dated May 10, 2016 and available at www. fitchratings. com.

SECURITY

The bonds are special obligations of NYLDC and are secured by the trustee's right, title, and interest in the consolidated bond and bond fund. PANYNJ's consolidated bonds are secured by net revenues of PANYNJ and a pledge of the general reserve and consolidated bond reserve funds.