OREANDA-NEWS. July 28, 2015. Fitch Ratings has affirmed the 'A' rating on the \\$1.225 billion New York Liberty Development Corporation, series 2011 liberty revenue bonds. The Rating Outlook is Stable.

The bonds bear interest only for the first 15 years with principal amortization beginning in 2027. The series 2011 liberty bonds are fixed-rate bonds and mature in 2051 with an optional 10-year call at par.

The 'A' rating reflects the financial support provided to the credit from the Port Authority of New York and New Jersey (PANYNJ; senior consolidated bonds rated 'AA-'/Outlook Stable) and from New York City (NYC; general obligation bonds rated 'AA'/Outlook Stable) in the form of the city space lease. Fitch considers both NYC's and PANYNJ's respective obligations with respect to 4 World Trade Center, LLC (4 WTC) as being subordinate to the debt obligations of each agency, and this is reflected in the rating on the series 2011 liberty revenue bonds. The bonds were issued in order to partly finance the construction of Tower 4 as part of PANYNJ's overall objective to complete the redevelopment of the World Trade Center site.

KEY RATING DRIVERS

Strong Supporting Entities: Strong financial support is offered to bondholders by highly rated entities in PANYNJ and NYC.

Visible and Critical Project: The project is highly visible and critical with broad based political support.

Special Obligations of PANYNJ: Tower 4 (T4) bond payments are special obligations of PANYNJ and contractual in nature, which Fitch views as weaker than direct debt of the PANYNJ.

City Lease Payments Subject to Appropriation: NYC's rental payment is subject to appropriation through agency budgets and is treated in a manner similar to a 'space lease' obligation versus a debt obligation in Fitch's analysis.

RATING SENSITIVITIES
Positive or Negative - Improvement or decline in the general credit profile of either or both PANYNJ and NYC could result in a rating action.

SUMMARY OF CREDIT

The T4 facility and the site upon which it is constructed are owned by PANYNJ, a municipal corporate instrumentality and political subdivision of the states of New York and New Jersey. T4 is leased by PANYNJ to 4 WTC, a Silverstein related-entity, under a lease having a 99-year term that commenced in 2001. 4 WTC, as landlord, leased approximately 600K gross rentable square feet of T4 to PANYNJ as a tenant pursuant to the amended and restated lease dated Nov. 16, 2006 for a term of 30 years. In addition, approximately 582K gross rentable square feet in T4 has been leased to NYC pursuant to the city space lease. Both PANYNJ and NYC moved in to their space during the first half of 2015.

PANYNJ's Tower 4 annual debt service payments will be made from net revenue deposited in the consolidated bond reserve fund (CBRF), which is the same source of payment used to fund debt service obligations on PANYNJ's subordinate versatile structured obligations (VSOs). Although PANYNJ has refunded all of its VSOs, the junior lien remains open with a historical and prospective 1.15x additional bonds test. Obligations paid out of the CBRF have no priority of payment or ranking, and there are no negative covenants insulating the Tower 4 annual debt service payments. Fitch believes the nature of the obligation is weaker than direct debt of the authority and any future subordinate debt service would likely receive priority of payment.