Shutdown Seen Imperiling Funds for Mass-Transit Munis

Municipal bonds backed by federal mass-transit aid are the most vulnerable to a U.S. government shutdown, according to Moody’s Investors Service.

Grant Anticipation Revenue Vehicles, known as Garvees, are sold by states or transit agencies and backed by federal highway or transportation aid. At least $10 billion of the bonds are outstanding in the $3.7 trillion muni market, according to data compiled by Bloomberg.

While money will continue to flow to pay debt service on highway Garvees, appropriations for the securities through the Federal Transit Administration would be affected by a shutdown, said Nick Samuels, a senior credit officer at Moody’s in New York.

The transit debt won’t face missed payments immediately, Samuels said in a telephone interview today. “But in a very prolonged shutdown scenario, some of those bonds might need some type of intervention,” such as using reserve funds or other state money, he said.

The U.S. government stands poised for its first partial shutdown in 17 years at midnight tonight, after a weekend with no signs of negotiations or compromise from Congress or the White House. Republicans and Democrats in Congress say they don’t want to close the government, though neither side is budging from their positions to avoid it.

Before it's here, it's on the Bloomberg Terminal.