Remarketing nearly $700 million of variable-rate debt last year helped New York's Metropolitan Transportation Authority position itself in a volatile market, according to its finance director.
"We've taken variable-rate bonds out of variable mode and fixed them out," Patrick McCoy told members of the MTA board's finance committee on Monday. "We're well positioned for a high interest-rate environment. We've completely transformed over the last three years and we have a very efficient and low-cost portfolio."
The MTA, with nearly $33 billion of debt, is one of the largest issuers in the municipal marketplace. It is scheduled to hold a retail order period Wednesday and an institutional sale Thursday for $250 million of Triborough Bridge and Tunnel Authority general revenue bonds and $100 million of general revenue bond anticipation notes. The latter will help fund some work related to Hurricane Sandy repair.
McCoy, in its
Overall for 2013, the MTA's net increase in debt was $1.7 billion. It issued $2.5 billion in new-money borrowing, refunded $1.7 billion and retired $812 million of debt through normal amortization.
Although the low-interest environment continued in 2013, McCoy cited the challenge of market volatility, which included a federal government shutdown, Detroit's Chapter 9 filing and Puerto Rico's fiscal distress.
Federal policy resulted in higher interest rates last year.
The 10-year Treasury yield was at 3.04% at year's end, up from 1.78% a year earlier, while the 30-year ended at 3.96%, up from 2.95% a year earlier.
Finance committee chairman Andrew Saul, who two years ago called the MTA's debt burden a "ticking time bomb," was more praiseworthy on Monday.
"There's no question we have a lot of debt, but we have a good control of it, the way it's laid out," he said.
Nearly 85% of the MTA's overall debt, or $27.8 billion, is fixed rate, according to McCoy. The balance consists of synthetic fixed rate (7.7%), variable rate (5.2%) and bond anticipation notes (2.6%).
According to McCoy, the portfolio for variable rate demand bonds is $2.4 billion, down $500 million from year-end 2012. "The point is to take advantage of low fixed rates," he said. The MTA, he added, has expended the use of the floating rate notes, which are tied to a Securities Industry and Financial Markets Association index.
"It's continued to be a growing product in the market," he said.
The MTA, he said, continues to monitor the performance of its $292 million now in outstanding auction rate securities.
Transportation revenue bonds amount to $19.1 billion, or 58.2% of the authority's portfolio. Dedicated tax fund bonds total $5.1 billion while the rest is divided among TBTA senior and subordinate bonds — $6.7 billion and $1.8 billion, respectively, involving an MTA unit more commonly known as Bridges and Tunnels — and $100.6 million of certificates of participation.
The MTA last year financed $2.41 billion in capital expenditures from bond proceeds, said McCoy. It included $847.2 million in capital construction — $413.1 million for the East Side access project for Long Island Rail Road trains and $385.5 million for the Second Avenue subway line construction.
MTA officials acknowledged Monday that it won't finish East Side access until at least 2023, 14 years behind schedule. Its new cost estimate of $10.8 billion is about $6.5 billion over the initial estimate.
The MTA last year also financed $955.3 million for New York City transit and buses, $315.5 for LIRR and Metro-North Railroad, and $281.9 for bridges and tunnels.
