Tags: S&P | Downgrade | NY | Thruway

S&P Downgrades NY Thruway Authority Debt

Tuesday, 29 October 2013 05:52 PM

The New York State Thruway Authority had its credit rating cut by Standard & Poor’s because funding a new $3.9 billion Tappan Zee Bridge may saddle the agency with too much debt.

The company lowered the rating one level to A, sixth-highest, from A+, according to a statement released Tuesday. The authority, which operates the longest U.S. toll road, is building the new span across the Hudson River. Before completing a financing plan, state officials are waiting to learn the fate of a loan request to the federal government. The bridge would more than double the authority’s $3.7 billion debt load.

“The combination of the lack of a specific tolling plan and the potential for lower traffic levels at a time when the NYSTA will increase its leverage significantly led to the downgrade,” Joseph Pezzimenti, an S&P analyst, said in the statement.

The rating cut is bad timing for Governor Andrew Cuomo, who has made building the span a priority, comparing it in scope to the 19th century construction of the Erie Canal. The lower credit grade may raise borrowing costs just as the authority begins building the biggest project in its 63-year history.

Construction formally started this month. The state has already privately borrowed $700 million to pay for it. Cuomo has said the project will be funded by tolls and bonds.

Tifia Loan

New York also has applied for a more than $1 billion federal Transportation Infrastructure Finance and Innovation Act loan, which would be the biggest awarded by the U.S. Transportation Department. Cuomo, a 55-year-old Democrat, is banking on low-cost federal funds to keep cash tolls from almost tripling on the replacement to the 57-year-old bridge.

The loan has taken more than a year to process. Terms of the loan will be made based in part on the Thruway Authority’s credit quality, according to federal guidelines.

The 3-mile-long Tappan Zee, which connects Rockland and Westchester counties about 20 miles (32 kilometers) north of Manhattan, was designed to last 50 years. It carries 138,000 vehicles each day, 40 percent more than intended. Transportation Secretary Anthony Foxx said at a U.S. Senate hearing in July that the project is “of national significance” and that he expects the loan to be approved.

Matt Wing, a Cuomo spokesman, and Dan Weiller, a Thruway spokesman, didn’t immediately respond to requests for comment.

Even with concern over financing the new bridge, investors have been demanding less yield to buy the agency’s debt. Authority bonds maturing in January 2026 traded Tuesday with an average yield of 3.38 percent, the lowest since February, data compiled by Bloomberg show.

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The New York State Thruway Authority had its credit rating cut by Standard & Poor's because funding a new $3.9 billion Tappan Zee Bridge may saddle the agency with too much debt.
Tuesday, 29 October 2013 05:52 PM
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