KBRA Assigns AA Rating with a Stable Outlook to the MTA Transportation Revenue Refunding Green Bonds, Series 2024A (Climate Bond Certified); Affirms Parity Debt
6 Mar 2024 | New York
KBRA assigns a long-term rating of AA with a Stable Outlook to the Metropolitan Transportation Authority (MTA) Transportation Revenue Refunding Green Bonds, Series 2024A (Climate Bond Certified). Concurrently, KBRA affirms the long-term rating of AA with a Stable Outlook on the MTA’s outstanding Transportation Revenue Bonds.
The long-term rating reflects the continued, gradual post-pandemic recovery in MTA transit and commuter rail ridership, and the Authority’s significantly improved operating budget, which is balanced annually through 2027 with the resolution of previously projected operating deficits totaling $6.535 billion.
Key Credit Considerations
The rating was assigned because of the following key credit considerations:
Credit Positives
- The gross pledge of Transportation Resolution revenues supports robust debt service coverage. Sound liquidity and reserves provide adequate operating flexibility.
- New York State’s actions to de-risk MTA’s operating budget and eliminate projected Plan Period deficits are credit positive.
- MTA’s $1.5 trillion in transportation assets serve over 15 million people. They are essential to the future of the New York metropolitan area, a region critical to New York State and the nation.
Credit Challenges
- The MTA has identified aging infrastructure, climate change, and evolving ridership patterns as key long-term challenges that will require extensive capital investment. Existing leverage is high; however, dedicated taxes and CBDTP revenues are expected to support the MTA’s most critical long-term capital plan initiatives.
- MTA’s high fixed cost burden, including contractually required labor-related obligations, remains an impediment to ongoing, structurally balanced operations.
Rating Sensitivities
For upgrade:
- Delivery of critical Capital Plan elements, including state-of-good-repair projects, with maintenance of strong debt service coverage from pledged Transportation Revenues.
For downgrade:
- The reappearance of significant unfunded deficits during the Plan Period.
- Sustained ridership declines.
To access rating and relevant documents, click here.