Fitch Rates Port Authority of NY & NJ $700MM Consolidated Bonds Ser 150 & 151 'AA-'; Outlook Stable

Business Wire, March 10, 2008

SAN FRANCISCO -- Fitch Ratings assigns an underlying 'AA-' rating to the Port Authority of New York and New Jersey's (the authority) $700 million of consolidated bonds, consisting of $350 million series 150 and $350 million series 151. The bonds are expected to sell competitively on or about March 12. Bond proceeds will be used to refund the outstanding VSO series 7 & 8, which were issued as auction rate and, similar to most of the U.S. market, performing poorly under current market conditions.

Fitch also affirms the underlying ratings on the following authority bonds:

--$9.3 billion consolidated bonds at 'AA-';

--$506 million versatile structure obligations series 1 through 6 at 'A ' and series 1 through 3 and series 5 at 'F1 ';

The Rating Outlook is Stable.

The authority's ratings reflect the demand for New York/New Jersey-based travel, supported by the region's diverse economy and status as a global center of commerce; the authority's expansive, diverse portfolio of transportation and commerce-related assets; institutionalized practices and fiscal conservatism; consistently healthy financial performance and debt service coverage, bolstered by the cost recovery nature of the airport use agreements, management cost control, timely toll increases; and significant balance sheet liquidity.

Continued healthy operating performance in 2007 supported solid coverage of debt carrying charges, reinvestment in facilities, and accumulation of reserves during the year. Net revenues (excluding WTC Sept 11 revenues) of approximately $1.6 billion provided 2.8 times (x) debt service coverage, with approximately $399 million of excess revenues added to authority reserves.

The authority's total reserve fund balances including the general reserve and consolidated bond reserve fund increased to $2.2 billion during 2007, representing a 23% of pro-forma consolidated bonds and notes. Reserve levels are budgeted to increase ($245 million) in 2008 mainly due to the receipt of insurance proceeds and third-party contributions associated with WTC site re-development.

The primary credit concern remains the potential for increased financial leverage and reduced liquidity as a result of the authority's very large financial commitments made for the improvement and expansion of its existing assets, along with developments at the World Trade Center (WTC) site and the Trans-Hudson Express Tunnel Project (THE). The latter two commitments are currently budgeted for as part of the authority's overall $29.5 billion 2007-2016 capital program, and are expected to be largely offset by third party funding sources. Government grants, insurance proceeds, and separately secured financings are expected to limit the burden of these commitments on the authority's consolidated bond credit.

In the absence of these important offsets, the risk remains that the authority, given its prominent role in lower Manhattan redevelopment and in regional transportation coordination, could be responsible for funding increased portions of the overall costs for both projects. Should this occur, significant additional consolidated bond debt and further toll rate increases at the authority's vehicular crossings would likely be necessary. Currently, the authority's capital plan and budget assumes a reasonable increase in debt supported capital investment and toll increases during Fiscal year 2008. The toll increases were implemented on March 2, 2008.

Fitch recognizes that the authority maintains significant economic rate-making flexibility at its various enterprises, including the airports, bridges and tunnels, providing the means to raise revenues to support new debt and rebuild liquidity, if needed. The operations of three metropolitan New York and New Jersey airports, the authority's primary revenue generating assets, have long been relied upon to support capital investment and subsidize non-income generating assets required as a result of the authority's broad mission. The ability of the airports to continue subsidizing non-self-supporting endeavors will become increasingly challenged, particularly as such excess income will be required to support terminal redevelopment projects and other on-going capital investment at the various airports.

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