N.Y. MTA Eyes $900M of CP Rather Than Revenue Bonds

New York’s Metropolitan Transportation Authority hopes to replace a $634 million bond transaction scheduled for September with commercial paper, an agency official said Monday.

The MTA finance committee on Monday approved up to $900 million of commercial paper to be issued on its ­transportation revenue credit and fixing out the debt as bonds in the future, pending successful negotiations with liquidity providers. The item goes before the full board Wednesday.

“That should take care of our new-money needs for the remainder of the year,” said MTA finance director Patrick McCoy, referring to capital projects financed through the revenue credit. “We’ll see how the rest of the year goes, but we think looking at spending now, it should cover our needs.”

A $318 million Triborough Bridge and Tunnel Authority issuance planned for October would not be affected because the MTA uses the different credits for separate purposes. The CP transaction would replace a $634 million transportation revenue bond deal planned for September.

The MTA’s existing $750 million CP program uses a credit facility from ABN AMRO Bank NV. That facility expires on Dec. 8 and will not be renewed because the bank is getting out of the letter-of-credit business, McCoy said. ABN AMRO completed a merger with Fortis Bank Nederland on July 1.

The MTA plans to sell up to $765 million of bonds in November to take out the outstanding commercial paper issued with the ABN AMRO credit facility.

The authority is negotiating with four banks — TD Bank, Barclays Bank, Royal Bank of Canada, and Citibank — to provide credit facilities for the expanded CP program. The banks were chosen from nine that responded to a request for proposals in May.

Rates are expected to be 70 basis points to 140 basis points on facilities ranging from two to three years, McCoy said. If negotiations are not successful, the MTA could negotiate with other banks and possibly go out with a smaller issue initially, if necessary.

Commercial paper can be issued for maturities ranging from a few days to 270 days. The MTA can roll the debt over for up to five years. McCoy said rates have lately been between 0.4% and 0.8%.

The agency has $31.01 billion of debt outstanding that includes more than $1 billion of bonds with expiring credit facilities in 2011 and more than $1 billion with expiring credit facilities in 2012.

The MTA plans to release its updated financial plan and preliminary budget for 2011 on Wednesday.

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Transportation industry New York
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