New York's Metropolitan Transportation Authority issued $5.3 billion of refunding bonds in 2012, which an official said produced present-value savings of $995 million structured to provide capacity for the 2015-2019 capital program.
"We had a banner year for refinancings in 2012," finance manager Patrick McCoy told the MTA board's finance committee Monday in his year-end review.
Refunding accounted for more than half the MTA's bond transactions in the calendar year. The authority, which runs New York City's subways, two regional commuter rail lines and seven area bridges and tunnels, borrowed $2.2 billion in new money, remarketed $2.1 billion of tendered obligations and retired $645 million of debt through normal amortization in 2012.
McCoy cited the 10-year AAA Municipal Market Data index ending 2012 at 1.72%, down from 1.83% a year earlier, and the 30-year at 2.83%, down from 3.55%.
"It was a very good year to do refunding," he added.
The MTA, one of the largest issuers in the municipal marketplace, has $31.2 billion of debt outstanding as of Dec. 31. Nearly $26 billion, or about 83%, is fixed-rate. The balance consists of synthetic fixed rate (9.6%), variable rate (4.6%) and commercial paper (2.9%).
Board finance chairman Andrew Saul touted the benefits of fixed-rate.
"True, we pay a little more in the short term, but in the longer term, we're out there at really low rates. This is big money for us. You got a lot of 30-year paper in there, too," he said. "Pat has done an outstanding job. This is a massive program. It's not an easy thing to roll."
Moody's Investors Service rates the transportation revenue bonds A2, while Fitch Ratings and Standard & Poor's assign A ratings.
Transportation revenue bonds (54.6%) and dedicated tax fund bonds (16.3%) combine for roughly 70% of the MTA's issuance, with Triborough Bridge and Tunnel Authority senior and subordinate bonds, and certificates of participation accounting for the remainder.
The MTA's $2.9 billion portfolio for variable rate demand bonds is lower by $742 million than at the end of 2011, according to McCoy.
During the year, it added four liquidity providers - PNC, US Bank, the California Public Employees' Retirement System and the California State Teachers' Retirement System, while replacing $1.8 billion in variable rate demand bonds supported by exiting providers or those the MTA considered weak. It eliminated its exposure to ABN-Amro, BNP Paribas, Dexia, Landesbank Baden-Württemberg and WestLB.
Also in 2012, the MTA expanded its use of floating-rate notes, which allow the authority to access the short-term variable rate market without the credit or liquidity support of a letter of credit or a standby purchase bond agreement provided by a bank. The MTA last year issued $931.5 million of such notes, which are indexed to the Securities Industry and Financial Markets Association rate or a percentage of the London Interbank Offered Rate.
McCoy said the MTA would continue to monitor the performance of its $325 million in outstanding auction rate securities.
The authority is targeting $6.7 billion in financing for 2013, including $2 billion in new money, $2.5 billion in Hurricane Sandy bond anticipation notes, $1 billion in remarketing and $1.2 billion in refunding.
On Jan. 11, the MTA sold a combined $911 million of Triborough general and subordinate refunding bonds, at a combined all-in true interest cost of 2.93%. Six days later it issued $500 million of new money transportation revenue bonds to finance transit and commuter projects, at an all-in true interest cost of 3.79%.
The authority expects to sell about $2 billion in the second quarter, roughly half of which will be new money.
It expects to issue the Sandy notes equally by quarter.
McCoy added that the MTA saved an estimated $44 million when the state agreed to waive a fee on bond refundings, and that Albany officials assured him the MTA would not have to pay any fees related to Sandy-related financings.
"That's a considerable sum of money," said board member Allen Cappelli.
McCoy also called investor outreach successful. The MTA held roadshows throughout the year, online and in San Francisco, Chicago, Philadelphia, New Hampshire and Boston, and held an investor call on Nov. 5, one week after Sandy struck.
"We provided the best available information about Sandy, and we received very productive feedback from investors. This was just what they needed," he said.