In September 2022, David Do, chair of New York City’s Taxi & Limousine Commission (TLC), celebrated a milestone: a new debt relief deal for the city’s beleaguered taxi industry. Do was flanked by US Senator Chuck Schumer and a crowd of drivers who had participated in protests that had led to the deal.
The problem: hundreds of drivers have yet to see the benefits of the debt relief program, known as Medallion Relief Program Plus (MRP+).
MRP+ was supposed to fix a problem plaguing thousands of taxi drivers, who racked up hundreds of millions of dollars in debt to purchase medallions. Between Uber and Lyft entering the market, and then Covid-19, the value of their medallions plummeted, leaving them suffocated by debt. Under the program – negotiated between the city, industry advocates and Marblegate, an investment bank that held the greatest share of medallion loans – the city has restructured medallion loans for nearly 2,000 drivers, using about $100 million in public funds to convince lenders to wipe away nearly $400 million in debt.
Unfortunately, some lenders are refusing to go along with the plan, leaving between 250 and 400 drivers out in the cold, according to industry advocates. They are stuck with hundreds of thousands of dollars in loans they cannot repay. One lender – S & R Medallion Corp. – refused to sign on. S & R offered drivers money for their medallions, but that would still leave many with hundreds of thousands of dollars of debt, and steep monthly installments due.
Another lender, OSK, also declined to join the MRP+.
By the time Mayor Eric Adams took office, suicides, protests and a hunger strike created intense pressure to help struggling drivers and medallion owners. In response, Adams and the TLC negotiated for the MRP+. In exchange for lenders restructuring each loan to a flat $200,000, the city would provide a $30,000 down payment per medallion, with drivers paying the remaining $170,000 over 25 years at an interest rate of just over 7%. In addition, the city would guarantee to cover defaults by dipping into an additional fund of roughly $46 million.
The restructuring was a boon for drivers able to participate. As of May, almost 1,800 drivers had benefited from the MRP+, dismissing nearly $400 million in debt, according to the TLC. But that still left hundreds of other drivers waiting for their loan companies to join in. Having Marblegate on board out of the gate, the TLC hoped other lenders would willingly join in.
Some lenders, such as PenFed Credit Union, readily signed on. But others continue to hold out. These include smaller financial firms, like BGW Holdings and OSK (formally O’Brien-Staley Partners/OSP), who had purchased medallion loans at a discount in recent years.
According to Rose Marie Cantanno, an attorney at the New York Legal Assistance Group, OSK would rather hold on to short-term loans in the hopes that drivers will make their balloon payments. Alex Korenkov, the manager of S & R, said his company restructured at least 20 loans under an original program created by Mayor de Blasio and four more under MRP+ – but he said he would not do so for any more drivers, because under the new plan lenders have to wait to receive their full payout: “We’re not going to tie ourselves down for 25 years with no way out.”
OSK, which now holds debt for 10% of New York’s active taxi medallions, had always conceded that medallions would never regain their original value. Jerry O’Brien, OSK’s CEO, warned in February 2020 that the original medallion loans were agreed to in a “different collateral universe” and that drivers could never be expected to pay off their full value. Still, OSK was reluctant to join the revised restructuring plan. Instead, according to industry advocates, OSK began dispatching repo men to seize medallions from delinquent drivers.
After some behind-the-scenes string-pulling by Schumer, OSK suddenly announced that it would join the MRP+. In a March 29, 2022, the firm announced that it “plans to participate in the enhanced program when it becomes operational.” But just two months later, OSK’s tune had changed. It filed a lawsuit against the New York Taxi Workers Alliance (NYTWA), alleging the group had used “nonstop militant action” to strong-arm OSK into joining MRP+ and insisted it could not join a program that was not yet operational. Two weeks later, OSK withdrew its suit, with O’Brien telling The City that NYTWA had stopped its “tortious interference.” NYTWA executive director Bhairavi Desai, who described the legal action as a “SLAPP suit,” said she is still baffled by the reversal.
Other lenders, like BGW Holdings, are simply looking to cash out however possible, demanding balloon payments in full from drivers and refusing to do any further restructuring, Catanno said. If drivers cannot reach an agreement with their lender or continue to make their payments, they may have to declare bankruptcy or risk foreclosure on their medallions. According to the NYTWA, holdout lenders have repossessed medallions, and at least one, BGW Holdings, sued its borrowers for more than $300,000 over defaulted payments.
Both NYTWA and the TLC have tried to persuade the holdouts that MRP+ would be financially beneficial while providing sorely needed stability for drivers, but their efforts have been unsuccessful. And the TLC lacks any power to compel the lenders to participate in the deal.
The TLC’s deadline for new MRP+ applications closed in April, and it and NYTWA are at a loss as to how to secure relief for the remaining drivers. NYTWA is now approaching lenders with a new plan, Desai said: an estimated $60 million offer, by an undisclosed potential investor, to buy out the company’s loans.
Source: New York Focus
