Alaska Railroad’s bonds appear to be safe despite uncertainty surrounding federal grants that back them, according to reports.
Bill O’Leary, Alaska Railroad’s chief financial officer, said the train system will be able to make its next two debt-service payments on $135 million of outstanding grant receipt bonds sold in 2006 and 2007, according to the Alaska Journal of Commerce.
The railroad has faced the possibility that the federal transportation funds backing the bonds could be cut amid wrangling in Congress over a new national transportation bill.
The concerns stem from earlier in the year when the Senate passed a national transportation measure that could cut some $30 million from Alaska Railroad’s allocation.
That risk prompted Moody’s Investors Service to downgrade the debt in April to A2 from A1 and keep the credit on negative watch for another drop due to the potential loss of the grant funding that backs the paper.
Even if the funding remains, Moody’s said risk of reauthorization of funds, which is endemic to bonds backed by anticipated federal grants, will remain.
