New York Thruway Authority rings in new year with a refunding deal

The New York State Thruway Authority had a busy last five years: converting its facilities to all-electric tolling, adapting to a changing revenue picture, and dealing with the fallout ? including a lawsuit ? from a construction project that was supposed to be finished in 2018, and while open, remediation work continues.

This is the backdrop ahead of the Thruway Authority's $848 million refunding bond deal, set to price January 7.

The bonds are junior indebtedness refunding obligations backed by a subordinate pledge of the Thruway Authority's systemwide revenues.

Goldman Sachs (GS) and Ramirez are co-managers for the deal, with 13 co-managers. Public Resources Advisory Group and Acacia Financial are co-municipal advisors and Hawkins and HLF are co-counsel.

The deal also features a voluntary tender process through which the authority will purchase outstanding Series M revenue bonds issued in 2019. The invitation to tender opened on December 17, and expires on January 6, according to the investor presentation. The tender final acceptance will take place on January 9.

The proceeds of the bonds may also refund a portion of Series M, as well as junior indebtedness obligations Series 2016A.

Some of the proceeds will also go toward a reserve account, which the authority is creating "to additionally secure the Series 2026A obligations," according to the investor presentation for the deal. The subaccount will be equal to either one-half of maximum annual debt service, 125% of average annual debt service, or 10% of net proceeds ? whichever is smallest.

The bonds are expected to mature in 2027 and 2028 and from 2033 to 2048. The deal also contains term bonds maturing in 2051 and 2056. There's a 10-year par call in 2036.

The bonds are rated A1 by Moody's Ratings and A by S&P Global Ratings.

Because the bonds have a subordinate lien, the rating is one notch lower than the Turnpike Authority's issuer default rating, S&P analyst Joseph Pezzimenti said. The authority created its subordinate lien to issue debt for the replacement of the Tappan Zee Bridge, which is now known as the Governor Mario M. Cuomo Bridge, Pezzimenti said.

Pezzimenti noted "how wide [the Thruway Authority's] road network is, and how important it is to facilitating the movement of both passenger and commercial vehicles across the state, while also connecting with key arterial routes to neighboring states."

The authority's toll revenue is a fairly even mix of commercial and private vehicles, Pezzimenti said; the balance can ideally protect the authority from economic cycles and changes in consumer behavior.

Moody's rating report for the deal notes that the Thruway Authority has pre-approved a 50-cent jump in tolls at the Cuomo Bridge in 2026 and 2027 a systemwide 5% toll rate increase in 2027. The authority's projected leverage is "relatively high," Moody's writes, "but in line with similarly rated peers of comparable size." The authority's leverage "reflects the extensive capital needs of its large-scale assets," Moody's added.

The Thruway Authority is "similar to a lot of mature statewide toll road credits" in many ways, Pezzimenti said. The Thruway's evolution since 2020 mirrors most of its peers, he added.

The authority has switched to all-electronic tolling, either through transponder or toll-by-mail, Pezzimenti said. The shift was accelerated across the industry by the pandemic, largely out of concern for the safety of human toll operators, he said.

The change in method of tolling also shaped revenues.

Toll-by-mail has become a source of revenue loss for the authority, Pezzimenti said, as nonpayment is an issue. A backlog in mailing invoices earlier in 2025 was resolved. However, because toll-by-mail makes up just 10% of its total toll revenue, "we don't really view it as a credit concern at this time."

The Thruway Authority has used the new flexibility of electronic tolling to add more tolling points across the system, Pezzimenti said, creating a significant increase in total transactions.

The Thruway Authority has a $2.8 billion capital plan for the next five years. The authority is no stranger to the muni market ? its last issuance was a nearly $2.5 billion competitive deal that sold in July ? and Moody's analyst Ursula Cassinerio said she expects more major deals to come.

"In the next five years, we expect the authority to refund existing bonds to achieve cost savings as it has done in the past," Cassinerio said via email, "and also to issue approximately $1.8 billion in new debt between 2026 and 2030 to fund the $2.8 billion five-year capital plan."

The authority is in a legal dispute with Tappan Zee Constructors, the contractor that rebuilt the Tappan Zee Bridge. After the majority of construction on the bridge was completed in 2018, TZC "began submitting claims to the authority in excess of their approved contract value and anticipated contract change orders," according to the investor presentation.

After six years of back and forth, the authority determined that TZC actually owes the authority around $62.7 million for "liquidated damages and remedial work," and filed a lawsuit against TZC in the New York State Supreme Court, according to the presentation. TZC filed its own lawsuit alleging that the Thruway Authority owes it $920 million, plus interest.

The litigation is ongoing.

The authority assured investors in its presentation that it has sufficient funds to complete the remediation work discussed in the lawsuit; according to the Moody's report, its current financing plan includes roughly $200 million in "contingency funding" for future bridge costs, whether they be remedial work or legal payments.

Pezzimenti views the lawsuit as far from settled. "Frankly, we just need more details," he said.

"Does it result in some uncertainty? Yes," he said, but not "to the point where we think it's mature enough to signal to the market that we think there could be downward pressure on the rating."