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By Meghna Chakrabarti (The Third Rail)
The Massachusetts Turnpike Authority Board of Directors has postponed a $100 million toll hike vote amid new budget concerns and news that the authority could face a massive $268 million payment to its creditor.
The payment stems from a 2002 Big Dig swaptions deal the Pike entered with the firm UBS. The terms state that if the Pike's bond insurer, Ambac Financial Group, tumbles into junk status with at least two ratings agencies, the Pike would be liable for a so-called termination payment.
Standard & Poor's downgraded Ambac three notches to BB on Wednesday, saying its prospects for writing new business were "negligible" and calling the firm "effectively in runoff."
Moody's downgraded Ambac in April, meaning UBS can now demand the $268 million payment from the Pike at will.
"Obviously there's a serious risk and problem," said Michael Widmer of the Massachusetts Taxpayers Foundation. "To say the least, neither the turnpike nor the Commonwealth has an extra $268 million."
Turnpike authority officials deferred questions on the Ambac downgrade to the Patrick administration, which confirmed the downgrade and said they've been in talks for months with UBS over alternatives to a termination payment, but have not been able to reach agreement.
If UBS issues a termination notice demanding the payment, the firm would be entitled to the payment if an alternative arrangement is not reached within 30 days.
In a statement released to the State House News Service, Cyndi Roy, spokeswoman for Administration and Finance Secretary Leslie Kirwan, said, "The Turnpike Authority is in this precarious situation due to risky financial transactions entered into under prior administrations. We anticipated the possibility of this termination event under the swap agreements almost one year ago and have worked with the legislature to authorize a course of action that could avoid a multi-million dollar payment to UBS. We have been negotiating with UBS to reach an agreement that is acceptable to the Commonwealth, and we will continue to do so."
The news comes as the turnpike authority faces elimination under a transportation restructuring bill that Gov. Deval Patrick is reviewing and as pike tollpayers face a $100 million toll hike July 1.
The Turnpike Board of Directors was set to vote on the toll hike Wednesday. The vote was postponed to Monday.
Statehouse News Service contributed to this report.
This program aired on June 24, 2009. The audio for this program is not available.
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