Moody's lowers $3.8 bln of MBTA sales-tax bonds by one notch
SAN FRANCISCO Nov 5 (Reuters) - Moody's Investors Service said on Monday it downgraded its rating on approximately $3.8 billion of the Massachusetts Bay Transportation Authority's senior sales tax bonds to 'Aa2' from 'Aa1,' citing concern about the authority's strained finances.
The ratings agency said in a statement that it also assigned a stable outlook for the debt, noting the outlook "reflects our view that despite operating pressures at the authority, bondholders are protected by a commonwealth-guaranteed floor on sales taxes."
Moody's said it based its one-notch downgrade of the nation's fifth largest mass transit system on its reduced debt service coverage, which reflects cumulative sales tax underperformance over the past decade, and "strained financial operations that have led to one-time actions to lower debt service costs for budget relief."
The rating agency said it is also concerned about the authority's complex variable rate debt and swap portfolio, its modest liquidity and "heightened risk in the variable rate portfolio related to liquidity facilities with banks that have been downgraded recently."