PANYNJ gets no bids on $300m in short-term notes - capital market deserted by investors

The Port Authority New York New Jersey (PANYNJ) got no bids Wednesday for three year notes (bonds) it had on offer, a sign of the breakdown of capital markets.  There was no ceiling on the interest rate or price to put lenders off. Longer term bonds of the PANYNJ are rated Aa3 by Moddy's, AA- by Fitch and S&P.

In a statement PANYNJ said the failure of the financing won't have any effect on its capital program since the loans were floated welll ahead of financial need. They were a "test of the financial markets."

PANYNJ is financially strong. Operating six toll crossings, the three major NY/norNJ airports, ports, office buildings and a small rail line the PANYNJ had revenues last year of $3,192m and operating expenses of $2,247m for a cash flow of $945m. Against this it charged $692m for depreciation and amortization for a profit of $248m. The authority in this nirvana for socialist business corporations pays not a cent of federal, state or local taxes - at least not on its tollroad, transit and port activities deemed to serve a "public purpose."

PANYNJ has increases in toll rates and other charges in place which will ensure revenues continue to increase.

A statement from the PA says: "we are confident that the markets will recover in the upcoming year when we plan to return with another sale.”

A Wall Street Journal report says: "The lack of bids for the three-year securities, which boast the highest short-term ratings from leading rating firms, reflects how few buyers are left in the $2.7 trillion municipal-bond market. Traditional large buyers have all but vanished..."

Another toll authority that has remained out of the market is North Carolina Turnpike.

Some sell bonds

However North Texas Tollway and Delaware DOT have successfully sold bonds in recent weeks.

Rater says taxable made it "too complicated"

A rating agency officer told us he thinks the explanation for the PANYNJ's failure to attract bids for the notes is that they were unusual in that these were PANYNJ taxable securities. They must have been taxable because they were to be used for what tax lawyers deem to be non-public purposes such as real estate development at the World Trade Center or port/airport concession-related activities.

"These were unusual securities being taxable from a public authority. Investment firms tend to be split into public non-taxable and private taxable. These firms have all kinds of problems at the moment. The last thing they need is to have work out what a taxable bond from a non-taxable authority is worth. It's not that big either."

TOLLROADSnews 2008-12-04