Port Authority Of New York & New Jersey consolidated bond rating lowered To ‘A+’ From ‘AA-’ on depressed activity levels

S&P Global Ratings lowered its long-term rating on the Port Authority of New York & New Jersey's (PANYNJ) consolidated bonds to 'A+' from 'AA-'. The outlook is negative. At the same time, S&P Global Ratings assigned its 'A+' rating to the authority's $1.1 billion consolidated notes series AAA.

S&P Global Ratings also took the following rating actions:

• Lowered the long-term rating on New York Liberty Development Corp.'s series 1WTC-2011 liberty revenue bonds to 'A+' from 'AA-';
  
• Lowered the long-term rating on Newark Housing Authority, N.J.'s series 2017 Port Authority-Port Newark Marine Terminal additional rent-backed refunding bonds to 'A+' from 'AA-';
  
• Lowered the long-term rating on the PANYNJ's series 2011 liberty revenue bonds to 'A' from 'A+'; and
  
• Lowered the short-term rating on the authority's commercial paper (CP) notes to 'A-1' from 'A-1+', reflecting the lower rating on the PANYNJ and the authority's adequate liquidity support.
  

All ratings, where applicable, have a negative outlook.

"The rating actions and negative outlook reflect our expectation that activity levels will be severely or materially depressed or unpredictable for 2020 and beyond due to COVID-19 outbreaks and associated impacts that we believe are outside of management's control," said S&P Global Ratings credit analyst Todd Spence.

Key credit strengths, in our opinion, are the PANYNJ's:

• Role as a provider of critical transportation links in the New York State and New Jersey region, operating the area's three major airports, key bridge-and-tunnel crossings between the two states, and various marine terminals;
  
• Economically deep, diverse, and populous service area that historically generated robust demand for key transportation infrastructure assets; and
  
• Experienced and proactive management team.
  

Key credit weaknesses, in our opinion, are the PANYNJ's:

• Hampered cash flow generation ability due to depressed aviation activity, PATH riders, and bridge-and-tunnel traffic due to factors outside of management's control, pressuring financial metrics;
  
• Relatively high debt levels with significant ongoing capital needs; and
  
• Exposure to potentially prolonged weak or unpredictable activity levels due to COVID-19 outbreaks and lingering associated impacts (such as the pandemic-induced recession; shifting travel restrictions; stay-at-home and social distancing restrictions; or behavioral changes with respect to air travel, transit, and vehicular travel), making effective financial budgeting and planning challenging.
  

Our rating action incorporates our opinion regarding the health and safety risks posed by the COVID-19 pandemic, which we view as a social factor that is resulting in significant operating and financial pressures for the authority. We analyzed the PANYNJ's risks related to environmental and governance factors, and consider them to be in line with our view of the standard for the transportation infrastructure sector. We will continue to evaluate these risks as the situation evolves.

The negative outlook reflects our expectation the we could lower the ratings if we believe activity levels will remain materially depressed for a period longer than our current expectation, negatively affecting the PANYNJ's finances for an extended period of time.

We could revise the outlook to stable in the next two years if we receive clarity on when and how well activity levels recover and we believe the PANYNJ's ability to maintain financial metrics consistent with the current rating is sustainable.