PFM In as New MTA Financial Adivisor

New York's Metropolitan Transportation Authority has picked new financial and swap advisors.

The MTA's full board Wednesday approved contracts, subject to final negotiation, with PFM Group of Philadelphia and Mohanty Gargiulo LLC of New York for financial advisory and swap advisory services, respectively. The respective incumbent firms, Lamont Financial Services Corp. and Swap Financial Group LLC, have served since August 2010.

The board also authorized the MTA's finance department to issue up to $2 billion of new-money bonds for transit and commuter capital programs, and a further $330 million for bridges and tunnels.

The board approved the authorization for transportation revenue bonds, dedicated tax fund bonds and Triborough Bridge and Tunnel Authority general revenue and subordinate revenue bonds at its monthly meeting Wednesday in midtown Manhattan.

The authority has about $33 billion of debt outstanding. Moody's assigns an A2 rating to the MTA's transportation revenue bonds, its primary credit, while Fitch Ratings and Standard & Poor's rate them A.

Also on Wednesday, the board increased the authorized amount of open-market purchases of MTA bonds, including 2 Broadway certificates of participation undertakings, to $50 million from $25 million.

According to a memo from the authority's chief financial officer, Robert Foran, MTA bonds are occasionally available for less than 100% of their par amount, plus accrued interest, either on the open market or as a result of holders approaching the agency with an unsolicited offer to sell MTA bonds.

"Making selective purchases of such MTA bonds is an efficient strategy in managing MTA's debt portfolio that will enable MTA to retire bonds at less than their par amount and eliminate remaining interest payments on the purchased bonds," said the memo.

Foran said the MTA to date has purchased $13 million par amount of securities for a total of $12.7 million plus accrued interest, resulting in savings of $403,500 plus avoided future interest.

The advisor appointments came after a request-for-proposals process.

The RFP resulted in 11 proposals — one jointly. Mohanty Gargiulo and Lamont originally bid jointly before a selection committee separated them.

PFM "has a deep knowledge of New York finance, and specifically is the top advisor to transportation and transit agencies nationally," Foran said in a memo to the board.

"Mohanty Gargiulo specializes in advising governmental municipalities and public benefit corporations on structuring and managing derivatives exposure." Additionally, said Foran, Mohanty Gargiulo is state-certified as a women and minority business enterprise.

PFM proposed a sliding scale per bond fee of 35 cents per $1,000 of bonds issued for the first $1.5 billion of bonds in a year, reducing to 25 cents above and subject to a cap of $700,000 annually. Mohanty Gargiulo proposed a flat annual fee of $175,000 for all services.

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Transportation industry New York
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