New York's Metropolitan Transportation Authority has scheduled a $500 million pricing of Series 2013A transportation bonds for Wednesday, after a one-day retail period.
Citi is the book-running senior manager for the negotiated deal, while M.R. Beal is special co-senior manager. Proceeds will finance transit and commuter projects for the agency, which runs the New York City's subway system and regional commuter trains. A gross lien on a diverse stream of pledged revenues secures the bonds.
Moody's Investors Service rates the bonds A2, while Fitch Ratings and Standard & Poor's assign A ratings.
The MTA has roughly $16.5 of transportation revenue bonds outstanding. Overall, the agency has $32 billion of debt outstanding, which could rise to $40 billion by 2016.
"The MTA's capacity to continue to leverage resources to fund expansion projects while meeting renewal and replacement needs may be limited in the future if projected financial performance does not come to fruition," Fitch wrote in a report.
Hurricane Sandy caused the worst damage in the system's 108-year-old history, MTA officials said. Late last year, preliminary estimates totaled nearly $5 billion in infrastructure damage and $268 million of lost revenue and increased operating costs due to the October superstorm.
Moody's, which plans continued monitoring of cleanup and repair costs on the MTA's operating and debt costs, expects the authority to receive substantial federal assistance.
"This should partially offset the need to issue more debt, although increased leveraging of the MTA's debt is possible," the rating agency said.
Storm damage aside, the MTA is staring at several other challenges, including a mammoth capital plan that includes such megaprojects as the Second Avenue subway line, East Side access for Long Island Rail Road trains, and a new transit hub at Fulton Street in lower Manhattan.
In addition, labor negotiations are still pending and the agency is appealing a legal ruling over the imposition of a tax on downstate payrolls, the MTA's largest nonfare source. The state legislature had approved the tax in May 2009. The agency has budgeted for $1.5 billion in receipts from the tax in 2012, rising to nearly $1.8 billion by 2016.
A state Supreme Court in Nassau County, Long Island — despite its name, the Supreme Court is the state's lowest court — declared it unconstitutional, though the MTA expects to win on appeal, citing four previous favorable rulings. For now, it can still collect.
"Should the authority experience a material erosion in its liquidity position, the rating could be pressured," Standard & Poor's wrote.
The board last month enacted biennial fare and toll increases, to take effect in March and bring the agency an additional $450 million annually.
Joseph Lhota resigned as MTA chairman on Dec. 31 to weigh a run for New York City mayor this year. Board vice chairman and former Bronx borough president Fernando Ferrer is the acting chairman until Gov. Andrew Cuomo nominates a replacement. The state Senate must confirm the nomination.