New York's Metropolitan Transportation Authority still holds a strong market presence despite three bond rating downgrades since the COVID-19 crisis emerged in March, Chief Financial Officer Robert Foran said.
"This has been true since 1982 when we first put the capital program together," Foran said Wednesday, one day before the MTA's latest planned issuance, $400 million of Triborough Bridge and Tunnel Authority Series 2020A general revenue bonds.
The MTA, one of the largest municipal issuers with $45.7 billion of debt including special credits, has undertaken a series of financings to cope with the economic fallout from the coronavirus. Moody's Investors Service, Fitch Ratings and S&P Global Ratings have downgraded it since March while Kroll Bond Rating Agency has issued warnings, including a watch downgrade for Thursday's TBTA offering.
Revenue from fares, taxes and other dedicated sources has plummeted. According to Foran, the authority in April — the first full month of the pandemic — fell $591 million against budget projections, while the drop for the year to date is $828 million.
The MTA recently sold tax-exempt, long-term bonds to take out $1 billion of bond anticipation notes due May 15.
"There's been a disruption in the short-term market," Foran said. "Effectively right now, the short-term market costs as much to borrow as the long-term market."
The MTA cannot tap the Federal Reserve's new Municipal Liquidity Facility directly but can do so through New York State, Foran added. He said discussions with state officials to use the facility to take out some bond anticipation notes are ongoing.
The authority also sold $450 million of taxable bonds to refinance a BAN due in September and raise $150 million of new capital. "By tax law we were not able to sell tax-exempt bonds that far in advance, but we wanted to take the opportunity to get into the market and eliminate that obligation," Foran said.
According to Foran, the MTA has $4 billion in liquidity, consisting of running cash balances of $1.6 billion. That includes $1.3 billion from the federal Cares Act, or one-third its allocation. The authority has requested a further $3.9 billion from Washington, while transit systems nationwide are seeking $33 billion.
"One of the issues which the economic restrictions has highlighted is the difficult straits in which major public transit agencies find themselves," municipal bond analyst Joseph Krist said.
The MTA has drawn on $704 million of its $900 million commercially available lines of credit.
According to data on the Municipal Securities Rulemaking Board's EMMA website, a block of Subseries 2002-D1 transportation refunding bonds maturing in 2022 that originally priced at 112.767 cents on the dollar and a 4% coupon sold to a customer Wednesday at a price of 101.282 cents and a 3.49% yield.
Based on the MTA's May 1 disclosure, bridge and tunnel traffic declined by an estimated 62% in April from 2019 figures. To gauge near-term challenges, Kroll adjusted its stress scenario in assuming 65%, 30%, and 15% toll revenue declines in the second through fourth quarters, respectively, from budgeted 2020 figures.
This, Kroll said, resulted in TBTA being able to meet combined debt service at 1.41 times.
"Even if the stay-at-home orders lapse, there is still the logistical issues of compliance with social distancing guidelines, staggered work hours to reduce passengers at peak travel times, and fears of the second wave of the virus — all of which will likely dampen a ridership rebound," Kroll said.
The MTA has shut down subways between 1 and 5 a.m. — a first for the 116-year-old authority — to conduct massive cleanings. According to Foye, 123 employees have died from the virus.
The authority has launched a testing program in conjunction with Columbia University's Irving Medical Center, using ultraviolet light to kill the virus that causes COVID-19.
"It's taking technology that's decades and decades old, ultraviolet light, and applying it to transit," MTA Chairman Patrick Foye told reporters. "We're excited about it. We weren't following best practices of anybody. We were leading the country."
The cost of systemwide implementation is still unknown, Foye added.
