New York’s Metropolitan Transportation Authority intends to sell $220 million of Series 2018B transportation revenue refunding green bonds this week.
Subject to market conditions, retail pricing is Wednesday, one day before the institutional offering.
JPMorgan is lead manager for the negotiated sale, which comes a week after the MTA’s second S&P downgrade in five months. Maturities will run from 2018 to 2028.
S&P Global Ratings last Thursday
S&P cited continued pressure on the MTA’s debt-service coverage after reviewing the authority’s midyear forecast and 2019 preliminary budget.
Debt-service coverage, based on S&P’s calculations, could be less than 1 times in the near term – for 2018 and 2019 – despite various measures that the MTA is taking to address its structural budget imbalance.
It said it could revise to stable if "at least sufficient [debt service coverage is achievable] is achievable in the near term and that the MTA can manage its significant and growing capital needs and debt plans."
Moody’s Investors Service rates the bonds A1 while Fitch Ratings and Kroll Bond Rating Agency assign AA-minus and AA-plus ratings, respectively.
S&P also
The state-run MTA is one of the largest municipal issuers, with roughly $39 billion in debt.
“We’re disappointed in S&P’s actions,” Finance Director Patrick McCoy said Thursday. “Debt service coverage is inherently strong for our bondholders.”
The MTA said the transportation revenue bond resolution provides for a gross lien on revenues, now forecasting 8.7 times coverage for 2018.
The authority stands to receive about $385 million annually from the New York City Transit Assistance Fund, supported by new fees on taxicab and for-hire vehicle trips in Manhattan south of 96th Street.
“The good news is the MTA has a new source of revenue,” said Jamison Dague, director of infrastructure for the watchdog Citizens Budget Commission. “The bad news is that the agency has cut its fare revenue estimates again as ridership has declined.”
According to a presentation before the MTA board last month, subway and bus ridership are down the past three and five years, respectively. “Growth in for-hire vehicles/taxis accelerated dramatically in 2017 with annual growth greater than the previous 4 years combined,” a
The MTA’s latest adjustment eliminates $376 million from its four-year financial plan. Since last year the authority has cut fare revenue estimates by more than $550 million, or 2.2% over the 2018-2021 period.
Dague said additional expenses from labor and materials necessary to fully implement various “action plans” to improve subways, buses and commuter railroads figure to further strain the budget.
“This gloomier budget picture comes even as the regional economy continues to grow,” said Dague. “A downturn or other risks, such as failure to implement fare and toll increases, achieve savings targets or negotiate new labor contracts at currently assumed wage increases, could lead to even larger deficits.”
MTA Chairman Joe Lhota, speaking last week at a New York Building Congress breakfast, said the authority is working to curb escalating project costs.
New York Gov. Andrew Cuomo recently appointed Kathryn Wylde and Rhonda Herman to the Metropolitan Transportation Sustainability Advisory Group, a panel established under the fiscal 2019 state budget and tasked with making recommendations on transit funding and improvement.
Wylde is president and chief executive of the nonprofit business organization Partnership for New York City. Herman has belonged to the Metro-North Railroad Commuter Council since 2008.
Nixon Peabody LLP and D. Seaton and Associates PA PC are co-bond counsel for this week’s sale. Public Resources Advisory Group and Rockfleet Financial Services Inc. are co-financial advisors.
Hawkins Delafield & Wood LLP is special disclosure counsel.
