Moody's Investors Service has downgraded to A1 from Aa3 the ratings on the Metropolitan Atlanta Rapid Transit Authority's (MARTA) $1.43 billion of outstanding third indenture sales tax revenue bonds.

Concurrently, Moody's affirmed the Aa2 ratings assigned to $365 million of outstanding first and second trust indenture sales tax indenture bonds, and revised the outlook on all of MARTA's outstanding debt to stable from negative.

The third indenture downgrade to A1 incorporates multiple years of contraction of the pledged revenues and their lagging recovery; a relatively low additional bonds test; adequate debt service coverage but an outsized but variable rate debt and swaps portfolio and limited available cash; prolonged strain on the system's operations and its plan to spend down its reserves in the near term; and the lower priority of payments of the third lien relative to the outstanding first and second lien bonds.

The affirmation of the first and second indenture Aa2 ratings reflects the fact that both liens are closed to additional issuance; the gross pledge of a 1% sales tax in a broad metropolitan area; strong coverage of peak debt service; and sound legal provisions including the trustee intercept of sales tax receipts.

The revision of the outlook to stable from negative reflects modest recovery of the sales tax receipts in MARTA's service area and the expectation that aggregate gross debt service coverage will remain more than 2.2 times.

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