MTA Finance Official: Synthetic Debt Manageable

Synthetic fixed-rate debt exposure is less than 10% of overall debt at New York’s Metropolitan Transportation Authority, its finance manager said.

Patrick McCoy, who called the exposure manageable, told the board of directors at its September meeting that the MTA’s portfolio includes $2.5 billion, or 7.7% of its roughly $33 billion of debt as of Sept. 1.

The totals exclude state service contract bonds.

Traditional fixed rate debt amounts to $28.2 billion, or 86% of the MTA’s portfolio, while the authority carried $2.2 billion, or 6.6%, in unhedged variable rate debt.

According to McCoy, the weighted average cost of the synthetic fixed rate portfolio is 3.7%, excluding the benefit of upfront payments and the cost of variable rate fees, against 4.2% for traditional fixed-rate bonds.

McCoy said MTA staff has amended swap agreements to comply with the Dodd-Frank Act.

“The amendments allow MTA to continue its fuel cost exposure and to continue to discuss swap-related matters with its counterparties,” McCoy said in his report.

Moody’s Investors Service assigns an A2 rating to the MTA’s primary credit, transportation revenue bonds, while Fitch Ratings and Standard & Poor’s assign A ratings.

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Transportation industry New York
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