State Fears Massive Balloon Payment Following Turnpike Insurer Downgrade

By Meghna Chakrabarti (The Third Rail)

So, we here at the Third Rail decided to take a week off. Apparently, we chose the wrong week. We returned to Boston yesterday and to a pile-up of transportation news, everything from leaks on proposed MBTA cutbacks, to a 7-mile backup at toll booths on the Pike.

And the hits keep on coming.

Ambac Assurance Corporation, the company that insures the Massachusetts Turnpike Authority, was downgraded to junk status this week by Moody's. It's only a "matter of time" until Standard & Poor's follows suit, a Patrick Administration spokeswoman said today. If they junk Ambac, the Pike could be liable for an immediate $371 million lump sum payment.

Ambac insures bonds held by the Pike. These bonds are part of swaptions agreemnts the Pike made with UBS back in 2001. The small print says if Ambac's rating drops too far, UBS can trigger the balloon payment from the Pike. Confused? So are lawmakers on Beacon Hill. Senator Mark Montigny has called for an investigation into the swaption agreements.

He wants heads to roll. After news that the toll backup may have been caused by a deliberate last-minute reduction in minimum staffing levels, enraged Easter weekend drivers might settle - the Third Rail just can't help saying - for the same heads on a Pike.