October 6, 2020 – In a report released on Friday, JP Morgan analysts said a bankruptcy scenario is unlikely for New York’s Metropolitan Transportation Authority (“MTA”) due to State law, and that New York State and City – and perhaps a Democratic President + Congress – will provide support.

Based on MTA public disclosures, JPM estimated the MTA faces a $16 billion deficit in 2020 through 2024, but should have sufficient liquidity (almost $6 billion as of end of August) to sustain operations until the first quarter of 2021. Further cashflow needs can be met through bond borrowing and directly borrowing from the Federal Reserve’s Municipal Liquidity Facility (“MLF”). The New York legislature authorized the MTA to borrow as much as $10 billion in “deficit financing” to fund operating costs.

Previously and in a different analysis, Bloomberg’s Brian Chappatta reported the MTA saved 85 basis points on a $450.7 million 3-year note by spurning public markets and tapping the MLF instead.

Due to COVID-19, the MTA suffered a 70% decline in ridership and 40% reduction in revenues year to date (as of September). While the MTA has been downgraded several times by the major rating agencies, the JPM team said additional downgrades may be in the horizon in the near term as the Authority’s financials continue to weaken.

In addition to fund-raising, the MTA will continue to benefit from support from the State and City, with JPM team saying “it is in the interests of the City and State to continue to support MTA”.

Under the original $55 billion 2020 – 2024 Capital Plan, the State had appropriated $3 billion in funds to the MTA, and the City was expected to provide matching funds.

JPM noted the MTA may also benefit from stimulus funds from the Federal government, saying:

While the possibility of $12bn in Federal aid dwindles by the day, as the House and Senate remain apart on size and timing, in the House bill, includes $32bn of aid for transit infrastructure, including funds for systems that require assistance to maintain operations due to COVID-19. If in 2021 we see a Democratic president with the support of Congress, a version of the current
House bill may pass, with aid for MTA (perhaps not $12bn of aid for MTA,
but still aid nevertheless).

Contact Jonas Anton at JAnton@buymuni.com.