MassPort to Defease Debt

The Massachusetts Port Authority will pay down $20.8 million of debt as the agency prepares to hand over the Tobin Bridge to a new entity, the Massachusetts Department of Transportation.

MassPort issued roughly that amount of debt for capital projects on the bridge but rather than defeasing the actual bonds it will tap into its $874 million fiscal 2010 capital budget to defease a roughly equal amount of its outstanding bonds, those that offer the most savings. All of MassPort’s bonds are consolidated obligations.

“What we have chosen to do and what the [Federal Aviation Administration] has agreed was prudent to do, was to refund the comparable amount of maturity,” said finance director Betsy Taylor. “Not do the bonds that were directly associated with the bridge, but rather do the authority’s most expensive outstanding debt so that we have a more cost-effective defeasance.”

MassPort will purchase state and local government securities that will sit in escrow until Jan. 1 when they become callable. ­MassDOT will acquire the Tobin Bridge from MassPort as part of the state’s transformation reform initiative. That change involves MassDOT managing most systems in the state to generate cost savings and unify oversight.

Last month, Standard & Poor’s revised MassPort’s $1.3 billion of outstanding airport revenue bonds, which carry a AA-minus rating, to negative from stable due to the loss of the Tobin Bridge and its revenues. MassPort saw $18 million of net revenues from the bridge in fiscal 2008, Standard & Poor’s said.

Taylor said Fitch Ratings is currently reviewing the credit and she expects to hear from the rating agency within two weeks. Moody’s Investors Service will review MassPort in the fall, according to Taylor.

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Transportation industry
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