3/11/03
Today the Chicago Transit Authority's Capital Grant Receipts Revenue Bonds received an A3 bond rating from Moody's Investors Service and an A- rating from Standard & Poor's. When sold to the market later this week, CTA's bonds will carry the required insurance from Ambac leading to an AAA rating. Moody's Investors Service is a leading global credit rating, research and risk analysis firm. Standard & Poor's is a leading provider of independent research, indices and ratings.
The bonds are secured by grant reimbursements from the Federal Transit Administration (FTA) under a Full Funding Grant Agreement (FFGA).
The CTA's ability to successfully manage and complete major capital projects on time and within budget is a key factor in the rating. Moody's specifically cited that the A3 rating was due to the CTA's success in securing and complying with FFGA requirements and its strong project management over the rehabilitation of the Cermak (Douglas) Branch of the Blue Line. This project received the FTA's top eligibility rating of ?highly recommended? and was selected for the New Starts program after a highly competitive and rigorous process.
Last week, at its monthly meeting, the Chicago Transit Board approved the issuance of debt in support of capital projects. The CTA will issue up to $275 million in Capital Grant Receipts Revenue Bonds backed by the FFGA for the Cermak (Douglas) Blue Line rehabilitation project.
'seven years ago, the Chicago Transit Board sent forth a clear message that it would accept nothing less than fiscal discipline," said Chicago Transit Board Chairman Valerie B. Jarrett. 'since that time, CTA staff ? from the field to finance ? have stepped up and lived by this discipline, through identifying and eliminating inefficiencies, re-examining the fundamentals of CTA service delivery, and pursuing the most creative and innovative financing tools available to public transit. Our financial house is in order, exemplified by a strong bond rating that will bring the ability to secure funding for future projects."
?The support of Mayor Richard M. Daley, the General Assembly, the Illinois Congressional delegation and programs such as Illinois FIRST were pivotal in getting the FFGA approved for the Cermak Blue Line project. Our bond rating is a direct result of that support," said CTA President Frank Kruesi. ?With these bonds the CTA will leverage its resources to make improvements to its facilities and its infrastructure. Through careful management, we have laid the groundwork for improvements that will benefit the CTA and its customers well into the future."
Issuing longer-term debt for the Cermak (Douglas) Blue Line rehabilitation project is similar to using a mortgage to pay for a long-term capital project up-front and paying off the debt over time.
CTA's financial advisors for the Blue Line bond issuance are First Albany Corporation, A.C. Advisory and Davis Financial, Inc. The bonds will finance the Blue Line until the CTA receives the remainder of funds expected from its FFGA with the FTA. The $482.6 million project is on time and on budget, and is expected to be completed in late January 2005.
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