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Fitch: Peace Bridge Board Functionality Key To Credit Quality
Fitch Ratings-New York-11 July 2013: In Fitch Ratings’ view, board functionality is key to maintaining credit quality for the Buffalo and Fort Erie Public Bridge Authority’s outstanding series 2005 toll bridge system revenue refunding bonds which are subject to mandatory tender on July 1, 2014 (rated ‘A’ with a Stable Outlook by Fitch).
The authority, a bi-national body that has managed the bridge since the 1930s, operates the Peace Bridge which connects Buffalo, New York and Fort Erie, Canada. Since early 2013, the authority’s board has encountered various governance issues that could have prevented it from addressing the mandatory tender of the series 2005 bonds. The issues have also interfered with decision-making processes relating to bridge operations and capital improvements.
The state of New York (the state) and the government of Canada recently reached an understanding, which reflects a willingness of the respective stakeholders to find solutions to the current problems. The understanding stipulates that the board is authorized to begin the process of remarketing the bonds. However, the board will ultimately need to vote in favor of the tender prior to the mandatory tender date.
Fitch believes any further disputes among board members could place the credit under negative pressure because a majority vote from the board is needed for the remarketing to proceed. The bridge authority’s 10-member board is composed of five Canadian and five U.S. citizens and personnel changes are not expected.
Fitch will monitor board functionality and the progress of the remarketing as the mandatory tender date nears. Should the authority be unable to proceed with a remarketing, the authority’s internal liquidity is currently sufficient to redeem all outstanding bonds; however, payment in full also requires a majority board vote.
The understanding also outlines several needed capital projects for the bridge that will enhance operational efficiency and ensure the bridge deck’s longevity, which should maintain the authority’s historically sound financial profile.
In addition, the proposed legislation that recently passed in both the New York State Assembly and Senate to abolish the authority has not been passed into law and the understanding indicates it will not take legal effect. The legislation does not expire until Dec. 31, 2013 unless New York State Governor Andrew M. Cuomo vetoes it; however, Canadian representatives maintain that the state cannot unilaterally dissolve the authority.
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