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New York’s MTA May Refinance Most Debt Since 2002 as Borrowing Costs Fall

New York’s Metropolitan Transportation Authority may refinance as much as $6.7 billion of debt this year, the most in a decade, to take advantage of borrowing costs near the lowest in at least 20 years.

The first portion of the bonds eligible for refunding become callable April 1, with the rest on Aug. 15, Patrick McCoy, finance director for the MTA, said today. The largest U.S. transit agency refinanced $13.5 billion in 2002, when yields fell to the lowest since the late 1960s.

“In the current market it works,” McCoy said today after an agency board meeting. He declined to estimate the potential savings, saying it would be premature.

The MTA is looking to cut costs after board members passed a $12.7 billion budget last month that includes an $86 million deficit. The agency operates Metro-North commuter rail; the Long Island Rail Road; New York City’s subway and bus systems; and some city bridges and tunnels.

The agency plans to refinance debt sold in 2002, when the average rate on benchmark tax-exempts due in 10 years was 4.05 percent, compared with yesterday’s 1.98 percent rate, according to Bloomberg Fair Value Index. The 10-year rate fell to 1.91 percent on Jan. 19, the lowest since at least March 1991, when the index begins.

An MTA revenue bond sold in 2002 and due November 2025 traded today with an average yield of 2.61 percent, 38 basis points above an index of benchmark municipals due in 13 years, according to data compiled by Bloomberg. The bonds are rated A2 by Moody’s Investors Service, the sixth-highest grade.

New Debt

McCoy said the agency will remarket $540 million of Triborough Bridge and Tunnel Authority bonds next week through a consortium of U.S. Bancorp and the two largest U.S. public pensions, the California Public Employees’ Retirement System and the California State Teachers’ Retirement System.

The agency will also sell as much as $1 billion in new debt in the next six weeks, he said.

MTA Chairman Joseph Lhota, whose appointment by Governor Andrew Cuomo was confirmed by the state Senate this month, traveled to Albany yesterday to ask state officials to waive a charge of $8.40 for every $1,000 of debt issued, he said in a press briefing. That would save as much as $54 million over the life of the bonds, he said.

To contact the reporters on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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