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New York MTA Taps $1 Billion of Bank Loans as Ridership Plunges

New York MTA Taps $1 Billion of Bank Loans as Ridership Plunges

(Bloomberg) -- New York’s Metropolitan Transportation Authority is tapping into $1 billion of bank loans and considering additional borrowing as it seeks $4 billion of federal aid as the system’s revenue and ridership plunge amid the coronavirus pandemic.

The MTA, the largest mass-transit provider in the U.S., is losing an estimated $87 million a week in revenue as companies ask employees to work from home and schools, most businesses, and cultural and sporting sites shutter.

Pat Foye, MTA’s chief executive officer, asked for a $4 billion federal bailout in a letter to the state’s Congressional delegation Tuesday. That request comes as the system expects to fully draw down its $1 billion of commercial bank lines of credit by Friday, according to a disclosure statement sent to bondholders Wednesday.

The MTA, which has a current operating budget of $17 billion, needs federal help to get health-care professionals and essential service workers to their jobs, Foye said Wednesday during a radio interview on 1010 WINS.

“This is a national disaster requiring a national solution,” Foye said during the radio interview. “The money, as I indicated in the letter, is needed urgently to continue carrying first responders, and transit workers and utility workers to their jobs -- doctors and nurses are obviously in that group as well.”

Near Term

In the near term, the MTA has $3.86 billion of liquidity resources, including the $1 billion in lines of credit, a cash balance of nearly $1.4 billion and internal flexible funds of $1.1 billion, according to the disclosure statement.

“These funds provide a temporary funding ‘bridge’ to a permanent solution to the lost revenue and higher expenses,” according to the statement. “They must be repaid or replaced. Use of these monies will leave MTA with a significant gap in funding for both the operating budget and capital plan over the longer term and will likely result in additional debt issuance and unfunded operating needs.”

Longer-term options to free up cash include replacing $1.64 billion of pay-as-you-go funds in the capital budget with long-term borrowing and potentially restructuring debt to generate about $1.8 billion, depending upon market conditions, according to the disclosure statement.

These changes would increase the MTA’s outstanding debt, which already stands at $45.3 billion. They could also impact the timing of MTA’s plans to improve service on its system of subways, commuter lines and buses, according to the disclosure statement.

Plunging Ridership

MTA’s ridership drop is striking. Morning ridership on Tuesday on the Metro-North Railroad plunged 90% and the Long Island Railroad dropped 67%, compared with a year earlier, according to the disclosure statement. Subway usage fell 60% on Monday compared with a year earlier.

Those declines are expected to cost the MTA more than $4 billion by the end of 2020 if the ridership trends continue for six months. Disinfecting and cleaning initiatives, which have ramped up this month, cost the agency $300 million.

The MTA is a state-run agency that provides 2.6 billion trips a year on subways, buses and commuter rail lines for 15.3 million people in New York City through Long Island, the southeastern part of the state and Connecticut.

©2020 Bloomberg L.P.