[PRCo] Re: Lease back financing

[John Swindler]

There's about 30 some transit agencies affected.  Perhaps it is not so much AIG and the transit systems - it is the brokers that received hefty commissions for putting these agreements together.  That's where the real money is made and decisions are made - at the individual level.
 
Do you remember those multi billion dollar tobacco settlements between the tobacco companies and various states about ten years ago?  The tobacco companies agreed to make payments over several decades.  Guess what your state politicians have been doing over past few years and who is now 'on the hook' if tobacco consumption declines?  
 
John
 
> From: trams2 at comcast.net> To: pittsburgh-railways at dementia.org> Subject: [PRCo] Re: Lease back financing> Date: Sat, 13 Dec 2008 07:12:58 -0500> > 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> >> >> >> >> >> >> >> > > > > > 
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