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Rating Action: Moody's upgrades Delaware River Port Authority, PA's Port District Project (PDP) bonds to A3 from Baa1; assigns A1 to Revenue Refunding Bonds, Series A of 2022 and A3 to PDP Refunding Bonds, Series 2022; outlook stableGlobal Credit Research - 11 Mar 2022New York, March 11, 2022 -- Moody's Investors Service has assigned A1 to Delaware River Port Authority, PA's approximately $228.575 million Revenue Refunding Bonds, Series A of 2022 (Federally Taxable) and A3 to the authority's $52.655 million Port District Project Refunding Bonds, Series 2022 (Forward Delivery). Concurrently, Moody's has affirmed the A1 rating on the outstanding revenue bonds and upgraded the rating on its outstanding Port District Project (PDP) bonds to A3 from Baa1. The outlook remains stable.RATINGS RATIONALEThe A1 on Delaware River Port Authority's (DRPA) senior lien revenue bonds reflects the essentiality of the authority's assets, which provide critical connectivity between major economic centers, primarily the mature Philadelphia metro area to the southern New Jersey region, supporting a robust traffic base but with limited prospects for strong traffic growth.The A1 rating considers the authority's market position as demonstrated by its ability to maintain robust credit metrics throughout the pandemic downturn, when traffic and PATCO passenger ridership plummeted by 24% and 64%, respectively. In 2020, Moody's senior net revenue debt service coverage ratio (DSCR) reduced to 1.51x from 1.98x, and its liquidity position measured by days cash on hand also dropped to 698 days from 753 days in 2019. Besides being more compressed, credit metrics remained at adequate levels. The rating affirmation reflects our expectation that financial performance will rebound to pre pandemic levels, supported by gradual traffic recovery and toll rate increases in the near future. Preliminary 2021 numbers indicate that traffic recovered to approximately 88% of 2019 levels, while PATCO passenger ridership recovered to 33%.Constraining factors include the age of DRPA's assets which may require substantial investments beyond the current capital plan. The 5-year capital plan for 2022-2026 ($738.9 million) is manageable and will be financed mostly with operating cash flow generation and liquidity reserves. Additionally, we expect subsidies from bridge toll revenues to PATCO will remain substantial in the next two years as passenger ridership recovery has been more challenging, and federal relief funds will have been fully drawn by 2022. Thus, a gradual depletion of liquidity sources is expected, though mitigated by improved bridge toll revenues expected by 2023 or 2024, following the planned toll rate increase.The A3 rating upgrade on the PDP bonds acknowledges the long track record of strong Moody's total net revenues DSCR, which has been above the 1.2x rate covenant on the senior lien, coupled with the authority's strong liquidity position. The A3 rating on the PDP bonds reflects the lack of a lien on a specific revenue stream and lack of a rate covenant. The PDP bonds benefit from a fully funded debt service reserve fund similar to the A1 rated revenue bonds.RATING OUTLOOKThe stable outlook reflects Moody's expectation that DRPA will maintain a bond indenture DSCR of around 2.0x, a Moody's senior net revenue DSCR of around 1.75x, a total DSCR of at least 1.5x, and days cash on hand above 500 days.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Significant increases in traffic volumes and revenues that lead to Moody's senior net revenue DSCR above 2.5x and Moody's total DSCR above 2.0x for a sustained period of time- Stable liquidity profile while maintaining asset conditions and continuing with scheduled capital expenditure improvementsFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Modestly declining traffic volumes and revenues or increased expenditure pressure that lead to Moody's senior net revenue DSCR below 1.6x and Moody's total DSCR below 1.4x for a sustained period of time- Material deterioration in liquidity profile with cash on hand falling below 500 daysLEGAL SECURITYThe senior lien revenue bonds are payable from a senior lien on net revenues. The bonds are backed by a cash funded debt service reserve fund (DSRF) sized at the lesser of maximum annual debt service (MADS) or 125% of average annual debt service. The Series A of 2022 will have a surety-funded debt service reserve sized at the same requirement mentioned above. The revenue bond rate covenant is equal to the greater of 1) 105% of the debt service requirement of all revenue bonds plus required DSRF deposits, Maintenance Reserve Fund deposits and PATCO subsidies for a given fiscal year and 2) 120% of the debt service requirement for all revenue bonds.DRPA's PDP bonds are general corporate obligations of the authority, payable from all legally available revenues after payments on the authority's revenue bonds. They are backed by a cash-funded debt service reserve equal to the lesser of maximum annual debt service, 125% of average annual debt service, or 10% of the bond proceeds.USE OF PROCEEDSThe proceeds of the Revenue Refunding Bonds, Series A of 2022 will be applied to (a) refunding a portion of the DRPA's Revenue Bonds, Series of 2013; (b) pay the premium for a debt service reserve insurance policy with respect to the 2022 Revenue Bonds; and (c) paying the costs of issuance. The 2022 Port District Project Refunding Bonds are being issued to (a) refund all of the outstanding 2012 Port District Project Refunding Bonds; (b) fund a deposit to the Debt Service Reserve Fund, and (c) to pay the costs of issuance of the 2022 Port District Project Refunding Bonds.PROFILEThe Delaware River Port Authority owns and operates a small regional network of four bridges crossing the Delaware river in the greater Philadelphia metropolitan area: Benjamin Franklin Bridge, Commodore Barry Bridge, Walt Whitman Bridge, and Betsy Ross Bridge. In 2020, bridge tolls generated approximately 96% of the authority's operating revenue. DRPA also owns a rapid transit line which runs between Philadelphia and Lindenwold, New Jersey through its wholly-owned subsidiary, the Port Authority Transit Corporation (PATCO). In 2020, the authority generated operating revenues of $287 million.METHODOLOGYThe principal methodology used in these ratings was Publicly Managed Toll Roads and Parking Facilities published in March 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1091602. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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