[PRCo]

[Schneider Fred]

John: How many Pennsylvania companies were also caught with their  
pants down in this debacle?

fred


Looks like Sacramento got caught in the sell and lease back in that  
AIG melt down.





Sacramento transit agency pinched by insurer's credit crunch



By Tony Bizjak  tbizjak at sacbee.com  Published: Wednesday, Nov. 19,  
2008 | Page 5B



The nation's credit markets meltdown has spread deeper into  
Sacramento – now threatening the region's main bus agency with a  
debilitating financial blow.

Sacramento Regional Transit is among 31 transit agencies nationally  
scrambling to avoid a multibillion-dollar hit as investors threaten  
to end deals tied to tottering insurance-industry giant American  
International Group Inc. – AIG.

Local officials say Sacramento's bus and light-rail operator could  
face a $32 million payment demand in January from an investment bank  
if the agency cannot find a solution. RT is declining, for now, to  
identify the investment bank.

RT may have to shelve light-rail expansion plans and shrink service  
for the third time in three years, even though public interest in  
transit has grown, officials said.

RT General Manager Mike Wiley was in Washington, D.C., with other  
transit heads Tuesday lobbying the federal government for help.

"We're one of the smaller players, but the percentage impact on us is  
higher," Wiley said. "Cutting our operating budget by 20 percent is  
just impossible."

To make matters worse, the Standard & Poor's ratings agency last week  
lowered RT's credit rating and put the troubled transit organization  
on its credit watch list.

RT's problems stem from a complicated series of bank lease-back  
deals, signed in 2005-2007, on 50 light-rail trains, RT officials said.

Under the arrangement, the light-rail trains are owned by the  
investment bank and leased to RT.

However, the two insurance companies backing the deal are in economic  
trouble and their credit ratings recently dropped to levels that  
allow the bank to cancel its deal with RT and demand a closing payment.

RT's main insurer for the deal is AIG, which has received a major  
government bailout to save it from collapse.

RT officials said they have negotiated an extension with the bank to  
Jan. 13 for time to find a new insurer or obtain federal backing for  
its lease agreement.

Sacramento was joined by transit representatives from New York, Los  
Angeles, Houston, St. Louis, Chicago, Boston and other cities – all  
in similar situations – on a Washington lobbying session Tuesday.

In a letter to the U.S. Treasury Secretary Henry Paulson urging  
assistance, Rep. Doris Matsui, D-Sacramento, estimated California  
transportation agencies, including Caltrans, face exposure of $700  
million in total.

RT's Wiley said the agencies and their supporters hope to persuade  
Treasury officials and the Federal Reserve Board to act as insurer.  
That action won't require any new federal bailout money for AIG, but  
would be tantamount to a guarantee behind the investments.

"It's a fairly easy solution," Wiley contended.

Federal agencies have talked with transit officials, however, but  
have not yet committed to help, he said.

Former RT chief Beverly Scott, now chairwoman of the American Public  
Transportation Association, described the problem as a crisis that  
could potentially cripple transit agencies.

"The innocent victims will be the millions of riders who rely on  
public transit every day," Scott said in a statement from Washington.



Call The Bee's Tony Bizjak, (916) 321-1059.

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