The Metropolitan Transportation Authority, which operates New York City’s subways, buses and commuter lines, cut a planned debt refinancing by about 40% as tax-exempt bond yields hovered near their highest levels in at least 15 years.
The MTA plans to sell $650 million of bonds as soon as Oct. 19, down from an originally planned $1.05 billion, according to Olga Chernat, the agency’s deputy chief of financial services. The agency scaled back the sale because higher borrowing costs reduced the potential savings from refinancing debt backed by fare and toll revenue.
Yields on benchmark 30-year tax-exempt bonds stood at 5.11% on Wednesday, reaching 5.26% on Sept. 29 — the highest since at least 2011. "With market rates going up, we adjusted the bond size to achieve our savings targets," Chernat said. Refunding candidates that no longer meet savings targets will be saved for future opportunities.
The MTA refinances existing debt to lower principal and interest payments, which account for about 14% of its $22.8 billion operating budget this year. As of Sept. 17, the agency had $49.8 billion of debt outstanding, including $16 billion of transportation revenue bonds. Moody’s rates those bonds A2, S&P assigns an equivalent A rating, and Fitch rates them AA.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing