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Rail News Home Passenger Rail

11/17/2008



Rail News: Passenger Rail

WMATA, Belgian bank reach leasing deal settlement


After nearly three days of talks in federal court, the Washington Metropolitan Area Transit Authority (WMATA) and Belgian bank KBC Group reached a settlement to end a long-term leasing deal. Terms weren't disclosed.

American Insurance Group (AIG) has guaranteed the lease agreement between KBC and WMATA, under which WMATA sold rail cars to the bank, which then leased them back to WMATA.

However, the lease agreement required AIG to maintain a high credit rating. When the insurance and financial services company's credit rating was recently downgraded, WMATA was technically in default of the agreements. KBC was seeking an immediate payment of $43 million from WMATA to terminate the agreement.

The case was being closely watched by other financial institutions and about 30 transit agencies that have similar agreements, according to WMATA. The agencies had been asking the Treasury Department or Federal Reserve to back the insurers' guarantees of the deals. WMATA has 14 similar lease agreements with other financial institutions.







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