OREANDA-NEWS. Fitch Ratings has assigned an 'F1' rating to the Metropolitan Transportation Authority (MTA), New York's \$500 million transportation revenue bond anticipation notes (BANs) series 2015A.

Fitch has also affirmed the 'A' rating on approximately \$20.7 billion (excluding commercial paper [CP]) in outstanding MTA transportation revenue bonds and \$967 million RRIF loan. The Rating Outlook on these bonds and loan is Stable.

The 'F1' rating on the short-term transportation revenue BANs reflects the underlying 'A' rating for the MTA's transportation revenue bonds and the MTA's historical stable demonstrated market access. The BANs are secured solely by the proceeds of other transportation bonds, unused proceeds of the BANs (to the extent they are available) and, with respect to interest payable on the series 2015A BANs, amounts available for payment of subordinated indebtedness. The series 2015A BANs are not secured by any other funds, accounts or amounts that are pledged to the payment of the transportation revenue bonds or parity obligations issued under the MTA's Resolution.

Some additional flexibility is provided in the structure with adequate timing between the maturity of the BANs (Feb. 29, 2016) and the call date (Jan. 15, 2016). Fitch notes the MTA's demonstrated refinancing history associated with short-term instruments well in advance of the maturity date as another key rating factor. In Fitch's opinion, in the event that the MTA is unable to refinance the BANs with a traditional fixed-rate transportation revenue bond solution, the MTA could issue variable-rate debt with or without bank support. Additionally, the MTA retains some, albeit limited, options to refinance the debt outside of a transportation revenue bond issuance including rolling the BANs, issuance on another lien (including the Dedicated Tax Fund lien rated 'AA-' or Triborough Bridge and Tunnel Authority lien ('AA-/A+') or using inter-agency loans.

KEY RATING DRIVERS

The 'A' rating reflects the gross lien on a diverse stream of pledged revenues, the essentiality of the MTA's transit network to the economy of the New York region, and the demonstrated ability of the MTA to produce near-term solutions for its operating and capital needs. The rating also reflects the need to generate sufficient cash to adequately cover operations of the system despite high debt service coverage ratios (DSCRs).

Strategic Importance: The MTA transportation network is essential to the economy of the New York region, with New York City Transit carrying an average of 8.05 million daily subway and bus riders and Metro-North Railroad and Long Island Rail Road (LIRR) carrying another 576,000 daily commuter rail passengers. While an independent authority, the MTA has received significant support from the state of New York in the form of additional tax sources aimed at closing projected operating budget gaps and addressing capital needs.

Highly Constrained Financial Operations: Despite high DSCRs from gross pledged revenues, the MTA's financial position is constrained given its extremely large operating profile and high fixed costs, including significant retiree pension benefits. In addition, some of the MTA's operating subsidies are vulnerable to economic conditions. While the MTA is required to provide a balanced current year budget, some tools available to meet a balanced budget, such as service reductions and fare increases, are politically unpopular.

Solid Security Pledge: The bonds are secured by a gross lien on a diverse stream of pledged operating revenues consisting of transit and commuter fares and excess bridge tolls and non-operating revenues consisting of various regional taxes.

Extremely Large Capital Needs: While the MTA's 2015-2019 proposed \$29 billion Capital Program (Transit and Commuter Programs) was vetoed by the Capital Programs Review Board (CPRB), the proposed Transit and Commuter Capital Program assumes around \$3.9 billion in MTA related debt. The proposed plan has a roughly \$15.2 billion gap in funding which is expected to be funded through a combination of additional federal, state and/or local resources or potentially additional MTA debt. The proposed TBTA Capital Program (not subject to CPRB approval) is estimated to be \$3.1 billion with approximately \$2.3 billion funded from TBTA bonds. The MTA has historically faced the constant challenge of delicately balancing the large rehabilitation needs of the system and expansion projects while covering operating expenses and maintaining financial flexibility.

Growing Annual Debt Burden: The MTA's capacity to continue to leverage resources to fund expansion projects while meeting renewal and replacement needs may be limited in the future if projected financial performance or additional operating subsidies do not come to fruition.

Peer Comparison: Given the size and breadth of the MTA's network of transportation assets, there is no direct comparison for the entity.

RATING SENSITIVITIES

Negative:

--Inability to achieve future projected operating efficiencies and implement other key elements of the cost reduction initiatives and/or maintain an ongoing state of good repair and other elements of the capital program;

--Significant cost overruns or delays in the capital program's mega-projects that lead to additional borrowing or deferral of core capital projects;

--Receipts in dedicated tax subsidies that are measurably below forecast levels could pressure the MTA's financial flexibility.

Positive:

--Given small near-term operating surpluses but medium-term projected deficits positive rating movement is unlikely in the near term.

TRANSACTION SUMMARY
The BANs are expected to sell on June 18, 2015 and will finance MTA capital projects. The BANs are expected to be refinanced ahead of the Feb. 29 2016 maturity date through an MTA long-term transportation revenue bond issuance. Fitch notes the BANs are subject to optional redemption on Jan. 15, 2016. The maturity of the take-out bonds will be determined by the assets financed by the long-term debt.