Jan
26

MTA looking at debt refinancing options

By

Debt refinancing is, by no stretch of the imagination, not a particularly sexy issue, but for the MTA, with so much debt on its books and more to come, refinancing could help the cash-starved agency save some dollars. So with borrowing costs nearing a two-decade low, the MTA is looking to refinance in order to save some money, Bloomberg News reported today.

According to the report, the authority may refinance around $6.7 billion in debt that was sold in 2002 and comes due in 2025. With the average ten-year rate below 2 percent — and over two percentage points lower than it was ten years ago — the MTA says it could realize some cost savings with such a move, but officials could not provide an exact figure. As Larry Littlefield noted at Streetsblog, the authority should proceed carefully here as they do not want to extend their debt obligations too far beyond the original term of the bonds.

In other financing news, MTA Chairman Joe Lhota asked the State Senate this week to provide the MTA with a debt issuance exemption. Currently, the state levies a charge of $8.40 for every $1000 of a debt issued, and by securing an exemption in advance of the MTA’s next round of bond offers, the authority could save over $50 million.



Categories : Asides, MTA Economics

11 Responses to “MTA looking at debt refinancing options”

  1. Larry Littlefield says:

    They shouldn’t extend one payment beyond the original term of the bonds. How much damage does Generation Greed want to do?

    • Larry Littlefield says:

      By the way: longer term = higher interet rate. Ideally, if they have 20 years left they should go to 15 years.

  2. Jerrold says:

    Speaking of money, I noticed today and yesterday the ads for private jet travel on this page. This blog seems to be a strange place to put those ads. I wonder how many New York City mass transit riders are one-percenters who can afford private jets. Maybe what that company needs is another advertising agency.

  3. Chris says:

    Honestly I tend to disagree with Larry on this one… it makes sense to seize today’s flat curve to extend debt as much as possible, ignoring the original term of the bonds. Just using Bloomberg, coupons for the bonds eligible for par calls in 2012 are generally 4.75-5.5%, with varying final maturities. If you can lower the coupon to under 4% (saving $$ today) and buy yourself an extra 10-15 years to pay back the bonds, why wouldn’t you, with long-term rates at an extraordinarily low level?

    Remember that whenever these bonds come due, there’s no actual cash flow to pay them back nor any plan of actually reducing debt. When we talk about the MTA’s “debt service” cost, that’s interest, not repayment of principal. Maturing debt gets rolled into new debt. The choice is: (1) issue long term debt now at low rates, or (2) issue shorter term debt at low rates and when that matures, be forced to issue new debt at the unknown rates 5-20 years hence. There’s no option to issue shorter debt and repay it sooner.

  4. Anon says:

    OT: They are pushing food ban through the senate. it will pass this time and then all the “trash receptacles located on the station platform” will be scrapped for metal.

  5. Anon says:

    S6312-2011

Trackbacks/Pingbacks

  1. [...] the MTA announced last week that it was hoping to refinance its debt, the Bloomberg News reporters who covered the story let slip an oft-overlooked fact. Because of an [...]

Leave a Reply

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>