Moody's Investors Service's rating action on the Metropolitan Transportation Authority's revenue bonds on Friday didn't appear to have an impact yesterday on secondary trading of the cash-strapped New York agency's bonds.
Moody's put the MTA's farebox-backed transportation revenue bonds on watch for a downgrade, citing fiscal strain and the lack of legislative action to find a long-term funding solution.
"As currently forecast, the MTA's operations would not support the existing A2 rating," Moody's said in a report. "A lack of legislative solutions, therefore, would likely result in a downgrade of at least one notch."
The action followed a special comment the rating agency published last month that said the MTA could face a downgrade.
A sampling of some trades on the secondary market of MTA revenue bonds didn't show a noticeable difference in yields between Thursday and yesterday.
For example, a customer on Thursday bought a $40,000 block of a tranche of 30-year bonds maturing in 2035, yielding 5.03%, according to trades reported to Municipal Securities Rulemaking Board. Yesterday, a customer purchased $25,000 of the same tranche at a yield of 5.027%.
Some market sources said that the MTA's difficult fiscal situation was so well known that the risks had likely already priced into the trades.
Moody's said it will complete a review of the credit over the next 90 days. The real test could be when the MTA next goes to market.
The agency plans a $400 million new-money transportation revenue bond deal next month and another $400 million deal in July. The MTA plans two more revenue deals this year, in the fall and winter, totaling $780 million in a combination of new money and refunding.
The Moody's action did not affect the MTA's Triborough Bridge and Tunnel Authority senior and subordinate credits, which it rates Aa2 and Aa3, respectively.
Fitch Ratings and Standard & Poor's assign the MTA's transportation revenue bonds A ratings.
Less than two weeks ago, Gov. David Paterson threatened to call a special legislative session of lawmakers, who are currently on recess, if they did not work out a rescue plan for the MTA. But as of press time yesterday no special had been called.
However, a shake-up at the state level was in progress yesterday with the announcement that Paterson's transportation secretary, Astrid Glynn, was resigning, effective May 8. A statement from the governor's office did not offer an explanation for her departure but said that first deputy commissioner Stanley Gee will serve as acting commissioner.
Over the past year, two plans to fund the MTA's capital program - the first, congestion pricing, and then the second a combination of new bridge tolls, fare increases, and a payroll tax - have failed to get legislative approval.
Senate Majority Leader Malcolm Smith, D-Queens, who opposed new tolling on bridges, has said that the MTA's next five-year capital plan needs to be linked with the state's next five-year highway and bridge plan, both of which expire at the end of this fiscal year.