UPDATE 1-NY mayor says Hudson Yds property deal "not dead"

(Recasts lead, adds mayor's comments, details)

By Joan Gralla

NEW YORK, May 9 (Reuters) - New York City could be on the hook for as much as $7 billion if it cannot revive a faltering deal to develop one of the last large vacant land tracts in Manhattan, a credit rating agency said on Friday, while Mayor Michael Bloomberg vowed that the deal is not dead.

The estimate by rating agency Standard & Poor's, which reflects the city's decision two years ago to sell $2 billion of bonds backed by various payments that the development was expected to produce, came a day after talks between the state's Metropolitan Transportation Authority and developer Tishman Speyer collapsed.

Bloomberg, however, speaking to reporters in London, said, "The plan isn't dead by any means."

Tishman Speyer's plan to develop a mix of commercial and residential towers on the MTA's 26-acre Hudson Yards rail site in west Midtown Manhattan included an extension of the No. 7 subway line.

Bloomberg, said he previously told Jerry Speyer, Tishman Speyer's chairman, to hold out for the No. 7 subway link that the city will pay for but that the MTA will build.

Bloomberg said that Speyer "raised this issue and I said, 'If I were you, I would make absolutely, positively sure that we are going to build that subway before I put a dime of my own money in.'"

Bloomberg, noting that London's Canary Wharf development was a costly failure for the original developer because a new subway link was delayed, vowed that will not happen in New York.