The Massachusetts Bay Transportation Authority will be coming to market on Tuesday with its first competitive deals in at least 15 years when it puts up for bid two separate sales tax and assessment refinancing transactions totaling about $344 million.
The MBTA will be offering about $118.5 of Series 2016A assessment bonds and around $225.7 million of Series 2016A senior sales tax capital appreciation bonds on July 19. Public Financial Management is financial advisor to the MBTA on the deal while Mintz Levin serves as bond counsel.
The deal's appeal is buttressed by the two highly rated revenue credits -- the sales tax bonds and the assessment bonds -- which are independent from the operations of the MBTA system.
The assessment bonds are rated Aa1 by Moody's Investors Service and triple-A by S&P Global Ratings and the senior sales tax bonds are rated Aa2 by Moody's and AA-plus by S&P.
The MBTA said that because of favorable market conditions and the high-quality of the two credits "the authority is looking forward to broad support from both the banking and investor communities."
"We want to reduce structural deficit, every dollar we save, we will reinvest into the system," Mike Abramo, MBTA's CFO, told The Bond Buyer. "We have a capital maintenance lockbox fund, which has about $86.2 million in there as of today. The only way that funds can be taken out is with a majority vote of the control board, who created the box."
Tuesday's sales are the second in a three phase process, Abramo said.
The first phase was a termination of five interest-rate swaps that had been "on the books for a while," as the management team aims to achieve a lower and more blended cost of capital.
With the completion of that first phase, some of that debt is now floating. The third phase will be a negotiated transaction that will hit the market sometime in September.
"This board has put together a finance plan that will put the MBTA on more stable footing for the future, create savings by lowering interest costs, free up cashflow to invest in capital and provide more optionality in the debt portfolio," said Brian Shortsleeve, MBTA's acting General Manager and Chief Administrator.
