New York’s Metropolitan Transportation Authority’s $30.1 billion of outstanding debt contains about $5.2 billion of variable-rate debt, of which $3 billion is in synthetic fixed-rate mode achieved through interest-rate swaps, according to a derivatives portfolio report.
The authority’s finance director, Patrick McCoy, who introduced the report at last Monday’s finance committee meeting, said synthetic fixed-rate debt has been a cost-effective source of capital, costing less than fixed-rate bonds at the time of issuance.
The MTA, he said, has 17 swap transactions outstanding, 15 of which meet the Governmental Accounting Standards Board rule for accounting treatment as “effective hedges.”
According to McCoy, the derivatives program consists of two types of hedges: interest-rate hedges, to achieve a lower net cost of borrowing, or to save on debt service, and fuel hedges, to stabilize budgeting for the price of commodities the MTA uses.
The agency’s finance committee and full board will next meet on Nov. 14 and 16, respectively.
