The derivatives portfolio of New York’s Metropolitan Transportation Authority remains an asset to its budget, its manager said as part of an annual review.
The authority’s derivatives reduce budget risk through interest-rate and fuel-hedging strategies of its derivatives program, its finance manager said.
“Interest rate exposure is managed through a combination of low-cost synthetic fixed rate, fixed rate portfolio management through refundings and reasonable floating rate exposure,” Patrick McCoy told members of the MTA’s finance committee in lower Manhattan on Monday.
McCoy
The authority is carrying $2.45 billion, or 6.8% of its portfolio, in synthetic, fixed-rate debt and $2.8 billion, or 7.7%, in unhedged variable-rate debt. Traditional fixed-rate bonds account for the vast majority of MTA’s portfolio, at $30.8 billion, or 85.5%.
The MTA on Nov. 2 will remarket two subseries of transportation revenue variable rate refunding bonds -- $42.6 million from 2002 and $125 million from 2012 -- converting both subseries from floating rate tender notes to variable interest rate demand obligations in weekly mode, each supported by separate irrevocable direct-pay letters of credit issued by TD Bank.
“This is just comparing a very favorable bank market, in the current market, as opposed to a less favorable floating rate note market, and we’re going to continue to pivot back and forth between those products to keep our costs as low as possible,” said McCoy.
On Nov. 16, the MTA will sell $170 million in Triborough Bridge and Tunnel Authority general revenue bonds in two series. Book-running senior manager Loop Capital Markets will lead a team entirely of minority and women business enterprise and service disabled-veteran owned groups.
