[PRCo] Re: Lease back financing

[Richard Allman]

MARTA for sure. Possibly WMATA

----- Original Message ----- 
From: "Phillip Clark Campbell" <pcc_sr at yahoo.com>
To: <pittsburgh-railways at dementia.org>
Sent: Saturday, December 13, 2008 12:58 AM
Subject: [PRCo] Lease back financing


> 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
>
>
>
>
>
>
>
>