Sunday, November 02, 2008

More Port Authority financial problems?

Wow.... Has anyone looked into this? The Washington Post reported last week that the collapse of AIG could have serious repercussions for some of the major transit systems in the country. The deal apparently involved some lease-buyback guarantees between the agencies with respect to their major capital investments such as rail cars. Somehow AIG fit into the mix with some guaranteed payment function which I don't know the details of.. sounds like the GIC's that got the bond insurers in trouble. The AIG default seems to have triggered some immediate payment clauses in these deals. The Port Authority of Allegheny County is reported elsewhere to be one of the primary transit agencies affected. Anyone know more details? If this really affects the Port Authority, it will be interesting to see the $$ involved. Can't be anywhere near as much as the systems with large rail systems, but still. The WashPo article says the worst case scenario for them (down in DC that is) is an unanticipated payment of $400 million. Even if the exposure for PAT is 1/20th of that it could be a serious problem here. Maybe this rises to the level of importance for the Port Authority to address on their "rumor of the day" site??

update: Down in DC it looks like a Federal judge has already had to intervene because of a call for payment related to this from a Belgian Bank. So if there is any PAT exposure to this, they have painted themselves into a corner. You know, given that the Port Authority has been so public that they are going to run out of money soon, they have essentially told any bank out there in a similar circumstance that they should press for their money immediately as well.

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