[PRCo] Re: Lease back financing

[Edward H. Lybarger]

It all goes back to the philosophy that greed is good.  Except, in reality,
it isn't. 

-----Original Message-----
From: pittsburgh-railways-bounce at lists.dementia.org
[mailto:pittsburgh-railways-bounce at lists.dementia.org] On Behalf Of
Schneider Fred
Sent: Saturday, December 13, 2008 1:14 AM
To: pittsburgh-railways at dementia.org
Subject: [PRCo] Re: Lease back financing

Phillip:

I have not tabulated how many agencies were involved but I pretty much
determined that the industry was using it as a way to finance  
operations.   There were a lot of companies caught with their pants  
down when AIG collapsed.

Fred

On Dec 13, 2008, at 12:58 AM, Phillip Clark Campbell wrote:

> To PRC group;
>
>
> About Thanksgiving it was mentioned that transit agencies were 
> involved in lease back arrangements with their equipment - BART in San 
> Francisco as well as Sacramento.
>
> I wrote the following:
>
> In another post you [Mr.Schneider] mentioned Sacramento being caught 
> up in the AIG fiasco.  BART has to come up with $40-million fast for 
> the same reason - AIG.
> Another news item said that SF Bay Area transit systems have 'several 
> hundred' of such lease back loans.
> What other systems are involved?  I haven't heard more.
> Here are two quotes from the URL below:
>
> "San Francisco made several hundred millions of dollars worth of 
> deals,..."
>
> "Transit agencies, then, are like crack addicts, addicted to the quick 
> benefits of loans, leases, and other poorly considered deals.."
>
> http://thetransportpolitic.wordpress.com/2008/10/26/short-term-
> thinking/
> I received an URL via email today which addresses the other systems 
> involved in the SF-bay  (the whole article is enclosed below:)
>
> http://tinyurl.com/5bezxv
>
> Here are some quotes from this article:
>
> "Muni: Sold and leased back 151 light-rail vehicles"  Maybe the repo 
> man will confiscate them in the middle of the night.
>
> "Should the deal sour, Muni could owe as much as $140 million - or 
> nearly 20 percent of its annual operating budget - ..."
>
> "The American Public Transportation Administration, or APTA, said it's 
> confident transit agencies won't have to fork over the hefty sums, 
> saying the federal government encouraged the deals."
>
>
> Now this is leadership isn't it.  The article makes plain that transit 
> agencies across the nation are affected.
>
>
> Phil
>
>
>
>
> Muni, BART may pay for poor past financial deals By Mike Aldax 
> Examiner Staff Writer 12/10/08 Pretty penny: The San Francisco 
> Municipal Transportation Agency may owe banks $130 million from risky 
> past investments.
>
> SAN FRANCISCO - As the economy worsens, financial deals made in the 
> past 20 years by public transit agencies nationwide - including in the 
> Bay Area - may have crippling results that would likely impact 
> service.
>
> More than 30 transit agencies, including BART and the San Francisco 
> Municipal Transportation Agency, are asking the federal government for 
> protection against risky financial deals made from 1989 through 2003.
>
> As part of the deals, the transit agencies sold rolling assets, such 
> as buses, rail cars and equipment, to bankers for a quick infusion of 
> cash.
> The bankers, who benefited from a tax shelter in such deals, would 
> then lease the assets back to the agencies at a discount, according to 
> the Tax Foundation, a nonprofit tax-research group based in 
> Washington, D.C.
>
> The penalties for terminating the deals involved steep fines for 
> transit agencies.
> And as the companies guaranteeing the deals fall victim to the global 
> credit crunch, transit agencies across the nation are facing millions 
> of dollars in payments to bankers.
>
> At its regular board meeting last week, Muni chief Nathaniel Ford 
> expressed concern about the sale-out, lease-in deal the transit agency 
> made with investors in 2002.
>
> Should the deal sour, Muni could owe as much as $140 million - or 
> nearly 20 percent of its annual operating budget - according to 
> spokesman Judson True.
>
> The transit agency's deals would "technically" default should the 
> guarantor of the agreement, Financial Security Assurance Inc., or FSA, 
> endure another credit-rating downgrade, as it has in recent months.
> Another
> rating hit is possible, as FSA's parent company, Belgian-French 
> financial services group Dexia SA, works to sell the company to 
> Assured Guaranty, a Bermuda-based holding company facing its own 
> financial challenges, True said.
>
> "We're working collaboratively with our elected representatives and 
> other agencies to find a solution so that this problem won't affect 
> service to our customers," he said.
>
> Transit agencies across the U.S. have banded together to ask the 
> federal government for a bailout.
>
> The American Public Transportation Administration, or APTA, said it's 
> confident transit agencies won't have to fork over the hefty sums, 
> saying the federal government encouraged the deals.
>
>  "There are discussions going on in Congress as well as with the 
> Treasury Department," said Mantill Williams, APTA spokesman.
>
> Beverly Scott, APTA chairwoman, said public transit users will be the 
> victims of any financial losses.
>
> "The innocent victims will be the millions of riders who rely on 
> public transit every day," Scott said.
>
> maldax at sfexaminer.com
>
> Coming back to haunt them
>
> A sale-in, lease-out crisis is affecting transit agencies in the Bay 
> Area and nationwide.
>
> Muni: Sold and leased back 151 light-rail vehicles
> Guarantor: Financial Security Assurance Inc. (FSA)
> Concern: Should Moody's downgrade FSA's current credit rating of Aa3, 
> Muni could owe as much as $130 million to banks. If completed, the 
> sale of FSA to Assured Guaranty Ltd. could downgrade the credit rating 
> to Aa2.
>
> BART: Sold and leased back rail equipment for $230 million
> Guarantor: American International Group Inc. (AIG)
> Concern: Should AIG's credit rating drop below B-triple plus, BART 
> could owe as much as $40 million to banks.
>
> Sources: SFMTA, BART
>
>
>
>
>
>
>