MBTA Sustainability Bond Issuance Met by Strong Investor Demand

BOSTON — In a first for any public agency in the United States, the MBTA this week issued $370.3 million of Sustainability Bonds.

"We could not be more pleased by the outcome of this issuance," said MBTA General Manager Luis Manuel Ramírez. "Not only did the market acknowledge our creditworthiness and commitment to fiscal sustainability, investors rewarded us for our positive environmental and social impact. I would like to commend MBTA Treasurer Paul Brandley and Chief Administrator Michael Abramo for their hard work in bringing this issuance to fruition and the beginnings of its success."

Nine banks bid on the MBTA's Sustainability Bonds, and eight banks bid on $130.9 million of traditional bonds. In addition to broader bank participation, the Sustainability Bonds garnered more aggressive pricing than the traditional bonds. With more banks participating in the MBTA’s Sustainability Bond issuance than its traditional issuance when the deal was priced on September 26 and banks bidding the Sustainability Bonds more aggressively, this strong market demand translated to historically lower borrowing costs for the MBTA.

Citibank purchased the Sustainability Bonds, and Wells Fargo purchased the traditional bonds. The MBTA will use proceeds from the bond issuance to fund its Capital Investment Program. This transaction marks the first time the MBTA has raised new capital funds since 2015.

"This issuance will support one of the most ambitious capital plans in the Authority’s history," said Chief Administrator Michael Abramo.

The bond sale was the MBTA's second competitive issuance in as many years. In June 2016, the MBTA refunded existing debt through its first competitive transaction in twenty-one years. The Sustainability Bonds and traditional bonds are rated AA by S&P Global and Aa3 by Moody’s Investor Services.

This is the first tax-exempt Sustainability Bond ever issued in the United States and a first for any public agency. The only other issuer of a Sustainability Bond was Starbucks last summer. Similar to Green Bonds that fund projects with environmental benefits, Sustainability Bonds take the concept a step further with proceeds used exclusively on projects that have social and/or environmental impacts. The International Capital Market Association established standards for determining project eligibility, tracking bond proceeds, and reporting on project impact.

Treasurer Paul Brandley said investors are beginning to think about more than the financial return their investments generate. "They care about how their dollars are being used and impacts on the environment and society more broadly," he added.

The MBTA Fiscal and Management Control Board’s Strategic Plan describes environmental stewardship, honesty, transparency, and equitability as key values of the organization. Brandley said a Sustainability Bond represents what the MBTA stands for, establishing clear environmental and social priorities in helping to prioritize projects and determine which might be most beneficial to the MBTA's constituents.

For more information on Sustainability Bonds, please visit the MBTA Sustainability Bond Issuance.