MARTA Adopts New Money-Saving Financing Tool

MARTA’s Board of Directors has approved the establishment of a Floating Rate Note (FRN) program, a move that will result in substantial savings for the transit agency.

The new program includes a transaction to convert a $95.7 million variable rate bond to a floating rate note. As the economy continues to improve, the cost of borrowing is expected to increase. Adopting this tool enables MARTA to lock in an affordable, short-term rate while maintaining flexibility to refund to fixed-rate debt as market opportunities arise.

“MARTA’s road to financial recovery continues to be a measured, forward-thinking process,” said MARTA GM/CEO Keith T. Parker. “The new FRN program and transaction is another testament to our commitment to be good stewards of the public’s dollars and the work of our finance team.”

Floating Rate Notes, a financing tool most often used by financial institutions and government entities, allow MARTA to trade on its own creditworthiness, eliminating the need for a bank letter of credit. As a result, MARTA will reduce its borrowing cost to less than four tenths of 1 percent, saving the agency more than $500,000 over the three-year life of the transaction.  The Series 2000B bond conversion is approximately 40 percent lower than the Authority’s current borrowing rate.

RBC Capital Markets served as the lead underwriter with JP Morgan and Bank of America/Merrill Lynch as co-underwriters. The PFM group served as financial advisor, Holland and Knight as bond counsel and McKenna, Long and Aldridge as disclosure counsel. Hunton and Williams was retained as underwriters counsel.

Earlier this year, the agency received a bond rating upgrade from Moody’s Investors Services. The rating increase signals that MARTA is performing in a fiscally responsible manner and allows it to borrow at more favorable interest rates. The FRN transaction resulted in a triple-A rating from Standard and Poor’s and an Aa2 rating from Moody’s.