No haircuts, New York MTA finance chief says

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Debt restructuring options for New York’s beleaguered Metropolitan Transportation Authority during the COVID-19 pandemic will not include bondholder haircuts, its chief financial officer said.

“We are not talking about haircuts. That is not what we’re talking about,” Robert Foran told reporters after Wednesday’s MTA board meeting.

The MTA, one of the largest municipal issuers with $45.6 billion of debt including special credits, has received downgrades to its transportation revenue bonds over the past month and has acknowledged the possibility of debt restructurings in event-based disclosures.

Stay-at-home requests, business closings and social distancing, all intended to neutralize the coronavirus pandemic, have triggered sharp ridership drops that have pummeled its revenues.

MTA worker wears protective mask as F train prepares to leave Coney Island, Brooklyn.

The MTA stands to lose up to $8.5 billion this calendar year, according to a report by consulting firm McKinsey & Co.

The authority, which received $3.8 billion through the federal CARES Act rescue package, has requested another $3.9 billion from Congress.

“We need liquidity, so that we can move forward until we have the federal funds in hand,” Foran said. “We need market access because we do have debt that’s maturing. We have an operating [deficit] that we’re going to have to close, because we’re going to have to have a permanent solution.”

That solution, he said, depends on the length of the pandemic and the return of ridership.

“We can either do a refunding for savings, we could do a refunding to push principal out,” Foran said. “If you’ve looked at our debt service, you would realize that our debt service after about 2032 drops off significantly. So we have a lot of room to put maturities out there.

"The federal government has come through, the state government has come through for us, and I believe that the bond market will come through as well.”

New York State has allowed the MTA to borrow up to $10 billion from its capital-account lockbox to cover operating deficits through the end of 2021.

“Deficit financing authority is something we don’t want to use, but is an important tool to have available,” Foran said.

Compared with 2019 results, ridership has declined 93% on the subways, 95% on Metro-North Railroad and 97% on Long Island Rail Road with equally reduced ridership on buses, according to bond documents.

"We have a lot of room to put maturities out there," said MTA Chief Financial Officer Robert Foran.

Moody's Investors Service, S&P Global Ratings and Fitch Ratings downgraded the authority over the past month, citing the coronavirus' effects. Moody's now rates the MTA's transportation revenue bond credit A1, while S&P and Fitch rate the bonds A-minus and A-plus, respectively.

Kroll Bond Rating Agency has the MTA on review for possible downgrade.

According to data on the Municipal Securities Rulemaking Board's EMMA website, a block of Series 2012B fixed-rate transportation revenue bonds maturing in 2039 that originally priced at 97.608 cents on the dollar and a 4.25% coupon sold to a customer Wednesday night at a price of 102.696 cents and a 4.573% yield.

Through Wednesday, 83 MTA workers have died of COVID-19. In addition, former acting LIRR president Raymond Kenny died Saturday of complications from the virus. He was 68. Kenny recently headed rail operations for New Jersey Transit.

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