Armed with a two-notch upgrade from Fitch Ratings, New York’s Metropolitan Transportation Authority intends to come to market next week with a competitive $700 million sale of transportation revenue bond anticipation notes.

The authority, one of the largest municipal issuers with roughly $37.8 billion of debt, also plans to issue $500 million in transportation revenue green bonds.

Fitch on June 7 elevated its rating on transportation revenue bonds, the authority's workhorse credit, to AA-minus from A, with a stable outlook. Fitch also upgraded the outstanding MTA transportation revenue BANs to F1-plus from F1.

Patrick McCoy, finance director of Metropolitan Transportation Authority, speaks on Tuesday, March 22, 2011.
"We were very pleased," MTA finance manager Patrick McCoy said of a Fitch Ratings upgrade. Bloomberg

"We were very pleased," finance manager Patrick McCoy said at the MTA board's finance committee meeting in lower Manhattan on Monday. "We certainly hope to generate additional investor excitement."

The transportation revenue bonds are backed by a gross lien on the MTA's operating revenues.

The MTA, a state-run agency, operates New York City's subways and buses, two regional commuter railroads and several bridges and tunnels. It is one of the largest municipal issuers with $37.8 billion of debt.

Fitch said its upgrade reflected the enhanced assessment of MTA’s leverage profile; its strong gross pledged revenues; and key statutory provisions as a result of the application of Fitch’s public sector revenue–supported debt criteria, published June 5.

"The strategic importance of the MTA transit network to the economy of the New York region supports Fitch's expectation for lower volatility user-based demand," said Fitch.

Proceeds from the $700 million sale will finance existing approved transit and commuter projects.

According to McCoy, the $500 million green bond sale will pay off outstanding Series 2017A-1 bond anticipation notes due Aug. 1.

Earlier this month, the authority remarketed $167.4 million of dedicated tax fund variable rate refunding bonds, Subseries 2008A-1 because the irrevocable direct-pay letter of credit issued by Royal Bank of Canada, acting through its New York branch, will be substituted with one issued by TD Bank.

"Our variable-rate program continues to be working well," said McCoy.

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