Reporting Phil Matier
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SAN FRANCISCO (KCBS) – All that extra money that was supposed to roll into California state coffers when Bay Area bridge tolls went up may get eaten up by a credit swap gone bad.
KCBS and Chronicle Insider Phil Matier said The Metropolitan Transportation Commission, the agency that oversees Bay Area bridges, has agreed to settle a contract with what had been one of the pillars of the municipal bond world for $120 million.
KCBS and Chronicle Insider Phil Matier Comments:
The MTC started using Ambac Financial Group’s AAA bond rating back in 2003 to sell bonds that would finance work on the Carquinez, Benicia and Bay Bridges at a much lower rate. That contract required the state to pay up when the company went bankrupt in 2008, and both sides disagreed on how much was owed.
The state ultimately decided it was cheaper to settle for $120 million than get involved in a prolonged lawsuit.
”This is unbelievable because you would think that once the lender went from AAA sterling bond status to junk bonds, that you’d be off the hook, but instead they came after MTC for more than $100 million, and MTC ponies that up,” said Matier.
”You know public agencies,” said Matier. “It wasn’t like they issued a press release saying that a year’s worth of toll increases just went up in smoke, (the information) just sort of eked out. There aren’t a lot of happy faces out there, but it just goes to show that this domino effect on the economy just keeps going, and Wall Street eventually gets its pound of flesh, and then a couple of extra ounces for the lawyers.”
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