WASHINGTON -- Metro and KBC Group agreed Friday to a settlement to end a long-term leasing deal, transit officials said.
"This is a win for the riders of our system and taxpayers of this region," said Metro General Manager John Catoe. "Taxpayers have been saved tens of millions of dollars, and Metro no longer faces the immediate threat of cuts to our capital budget and a downgrading of our credit rating."
Metro and KBC, a Belgian bank, agreed not to discuss the terms.
KBC sought $43 million from Metro after insurer AIG's credit rating was downgraded, putting the deal in technical default, Metro said. AIG had guaranteed the agreement between KBC and Metro, allowing KBC to seek payment.
Metro wanted a federal judge to temporarily bar the bank from collecting, but the judge urged a compromise Wednesday.
Other transit agencies and financial institutions in similar situations closely watched this case, according to Metro.
"It sends a strong message to other banks that they cannot make a financial windfall at the expense of transit riders," Catoe said.
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Several financial institutions with similar lease agreements with Metro have threatened to put the transit agency in default if the transit agency doesn't find more high-rated insurance coverage, Metro said.
Metro and 30 other transit agencies want the Treasury Department or Federal Reserve to guarantee insurers' credit ratings. Officials from Metro and several other transit agencies will be on Capitol Hill Tuesday to urge Congress to add a provision to the economic stimulus bill that would require the Treasury Department to back AIG and other insurers' credit ratings.
