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MBTA hopes to raise $350 million with sale of bonds

By Jim O'Sullivan
State House News Service / October 10, 2008
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The MBTA plans to try the credit market next week, hoping investors will buy $350 million in bonds, which would help the agency pay off short-term debt, fund its capital program, and replenish its debt service reserves.

Agency officials said they were uncertain whether they could secure favorable interest rates, a problem plaguing many prospective borrowers as credit markets have just this week showed signs of stabilizing. If the $350 million in assessment bonds do not attract buyers, the T will wait and try again.

"I don't want to enter a market that's a high-interest rate environment if there's some expectation that that would be lower in the next three to six weeks," said Jonathan Davis, the agency's chief financial officer.

About $202 million raised from the bond sale would fund part of the capital program for the Massachusetts Bay Transportation Authority.

Another $100 million would allow the T to pay off short-term commercial paper debts, and $37 million would go toward the account from which the agency pays down its debt.

The remainder would pay for the cost of issuing the bonds, Davis said.

"We have time to wait here," Davis said. "We have time to wait until sometime in November to issue the bonds, if need be."

The T carries more than $8 billion in debt, but has a strong bond rating.

Davis said the T hopes to sell the bonds on Wednesday and Thursday.

According to disclosures to bond buyers, the MBTA last week terminated its four swaption agreements with Lehman Brothers, after the financial giant's bankruptcy, moving the deals to Deutsche Bank under the same terms. The move came at "no cost to the authority," Davis said.

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