New York's Metropolitan Transportation Authority will continue to bring its workhorse transportation revenue bonds to market with a green designation as long as investor demand warrants it, an MTA finance official said Monday.
The MTA, one of the largest municipal issuers with roughly $36 billion of debt, sold $782.5 million of transportation revenue green bonds on Feb. 18.
It was the MTA's inaugural green issuance, the largest U.S.-certified green bond to date and the first U.S. municipal bond certified under new international criteria for investment in transport infrastructure compatible with a 2 degrees Celsius, or 36 degrees Farenheit, warming outcome.
"We were very pleased with the results of the transaction," finance manager Patrick McCoy told the MTA board's finance committee in lower Manhattan. McCoy said the green sale helps broaden the authority's investor base. Market conditions enabled the MTA to add some refunding bonds.
Ramirez & Co. was book-running senior manager for the transaction, which included a marketing campaign and investor call. The MTA will use proceeds to pay off $500 million in outstanding Series 2015A bond anticipation notes and to advance refund $72.3 million of Series 2006A transportation revenue bonds and $293.7 million of Series 2008C TRBs, for an aggregate amount of $366 million.
Moody's Investors Service rated the bonds A1 and Standard & Poor's rated them AA-minus. Fitch Ratings and Kroll Bond Rating Agency assigned A and AA-plus ratings.
The sale, said McCoy, produced a combined all-in true interest cost of 3.54%. The MTA issued $444.6 million of new money and $337.9 million of refunding bonds, all under the green designation, which London-based Climate Bonds Initiative certified through analytics firm Sustainalytics.
"We had very favorable market conditions, and the spreads between the high-grade revenue index and the transportation revenue bonds were the best we've ever seen," said McCoy.
The sale, according to McCoy, included $270 million in retail orders, "several of which came from high-net-worth individuals who bought the bonds just because they were labeled green."
The refunding, said McCoy, resulted in a net present value savings of $68.49 million, or 18.71% of the par amount of the refunded bonds.
Special co-senior managers Stern Brothers & Co., a women business enterprise firm, and Drexel Hamilton LLC, a service-disabled, veteran-owned firm. Nixon Peabody LLP and D. Seaton and Associates were co-bond counsel, and Public Financial Management Inc. was financial advisor.
The MTA in March intends to issue about $500 million in dedicated tax fund refunding bonds.
"I would just note that this is market sensitive and the value will go up and down depending on market conditions," said McCoy. Book-running senior manager Wells Fargo Securities will lead the transaction.
