New York, NY —
Investors are betting against another Sandy-sized storm hitting New York City. The first ever bond tied to storm surge levels around New York city generated so much market interest that the bond has grown by 60%.
The MTA first marketed the bond to investors its preliminary size was $125-million. That’s what MTA wanted in protection from storm surge.
The MTA first marketed the bond to investors earlier this month. Its preliminary size was $125-million. But investors were so interested in getting in on the bond, the MTA increased its size to $200-million.
If storm surge levels go above the stated water levels during a named storm, the investors will have to pay that amount to the MTA. If there's no storm event, the MTA is on the hook to give the investors a return of about 4.5% on the bonds.
"Investors feel that the return the notes offer is worth it for the level of risk," said Steve Evans, owner of the online reinsurance site Artemis.
"They feel that they will be compensated sufficiently to make it worth assuming the risk of the waters breaching the trigger levels."
The bond was the first of its kind tied to water levels, and the first ever floated by a transit organization. The MTA was out about $5-billion from Sandy.
The MTA won't comment on the bond.