S&P downgrades bonds as dredging dispute drags on

S&P downgrades bonds as dredging dispute drags on Bonds issued by the Delaware River Port Authority have been downgraded by the rating agency Standard & Poor's.
   The agency noted that a dispute between the governors of Pennsylvania and New Jersey over plans to deepen the main shipping channel in the river from 40 feet to 45 feet has resulted in the agency’s board not meeting for nearly a year and a half.
   The agency has little to do with the day-to-day operation of marine terminals on the river — that is done by other state government departments such as the Philadelphia Regional Port Authority, the South Jersey Port Authority in Camden, and the Diamond State Port Corp. in Wilmington, Delaware. But the agency does oversee a cruise terminal and intermodal rail facility called Ameriport in Philadelphia, as well as local bridges, ferries, and a passenger railroad.
   “The board has failed to convene since November 2005 due to a dispute over a Delaware River dredging project. As a result, board actions required under bond indentures, the compact governing the authority, and other approvals typical of oversight bodies have not occurred,” S&P said.
   The DRPA is the local sponsor on the federal project, and Pennsylvania Gov. Edward Rendell has been a strong supporter of plans to deepen the channel.
   Gov. Jon Corzine has not commented publicly on the planned dredging, which he opposed.
   Rendell, who is also chairman of the DRPA, has been having Pennsylvania members of its board boycott meetings so that without a quorum it cannot meet.
   A report in the Philadelphia Inquirer this week said a resolution of the dispute may have been in the works, but has been delayed because of the automobile accident last week that has left Corzine hospitalized.
   S&P lowered its underlying rating on Delaware River Port Authority’s $357 million series 1995 revenue bonds one notch to A- from A, and $471 million series 1998 and 1999 revenue bonds one notch to BBB+ from A-, and removed the ratings from CreditWatch with negative implications where they were placed on Feb. 24, 2006.
   The rating service also affirmed its BBB- underlying rating on the authority’s $361 million series 1998, 1999 and 2001 revenue bonds and removed the rating from CreditWatch with negative implications where it was placed on Feb. 24.
   In addition, Standard & Poor’s has assigned a negative outlook to the ratings.
   “The rating actions reflect concern that the board’s continuing inaction on authority matters does not reflect a governance structure associated with strong public enterprises,” S&P said.
   However, it noted “management has taken the necessary actions to meet all critical, budgeting, near-term financial reporting, and bond covenant compliance issues.”