The Massachusetts Bay Transportation Authority plans a $415.6 million sale of Series 2012A assessment bonds on Thursday, after a one-day retail period.
Ramirez & Co. is the lead manager for the negotiated issue, which will consist of $210 million of new-money bonds, $179 million of advance refunding bonds and $28 million of restructuring bonds.
The debt from the state of Massachusetts’ largest transportation agency will be fixed rate and tax-exempt, with no swaps involved.
The assessment bonds are secured by an absolute and unconditional general obligation of each participating community.
The MBTA serves 175 cities and towns.
According to general manager Jonathan Davis, the proceeds will benefit the authority’s capital program.
Infrastructure improvements will include new subway cars, commuter rail and locomotive trains.
The “T,” as the system is commonly called within Massachusetts, also plans upgrades to its power system, bridges and handicapped access.
“This provides us a new opportunity to enter the market,” Davis said in an interview.
Bond counsel is Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC. Eckert Seamans Cherin & Mellott LLC is representing the underwriters.
Standard & Poor’s rates the bonds AAA, while Moody’s Investors Service assigns a Aa1.
According to Moody’s, rating strengths include the strong credit quality of the participating local governments, an assessment bond coverage expected to remain strong at more than three times over the near term, bondholder protections that include a debt service reserve fund, a 1.2 times additional bonds test, a cross-pledge of the MBTA’s sales tax revenues on a subordinate basis, and the state’s covenant not to divert revenue streams or reduce them below specified floor amounts.
Credit challenges include its heavy reliance on debt, according to Moody’s analysts.
“The authority has substantial fixed costs and sizeable capital needs, with limited pay-as-you-go funding expected during the next several years,” the rating agency said.
In April, the MBTA’s board approved 25% fare increases and service cuts to close what had been a $161 million budget deficit.
Massachusetts lawmakers are considering an additional $51 million in one-shot revenues to close the gap before the fiscal year closes July 1.
By law, the authority must enter each year with a balanced budget.
Ridership on the T’s heavy rail subway trains and light-rail street cars increased significantly year over year in the first quarter of 2012, according to data released this week by the American Public Transportation Association.
The Green Line light-rail system experienced a 12.6% ridership spike for that quarter, according to the Washington-based group, while heavy rail usage was up 6.4%.
Nationally, transit system usage was up 5% from the same period of 2011.
The MBTA has also issued requests for qualifications to operate its commuter rail system, which carries 144,000 passengers per day through 14 rail lines.
Massachusetts Bay Commuter Railroad Co., a consortium formed to operate the lines, has held the contract since 2003. Its original contract was extended five years to 2013.
An informational meeting is scheduled for 9 a.m. Eastern Standard Time on June 12 at the MBTA Boston Engine Terminal in Somerville, Mass.
The deadline for submitting an RFQ is July 6. A proposer must submit statements of qualifications no later than 2 p.m. July 12.
According to Davis, the MBTA would then issue a request for proposals.