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Cabbies aren't the only ones feeling the heat from Uber Technologies's incursion into New York City. Their lenders are, too.
Taxi companies typically borrow against the value of medallions - licences to carry passengers - and then refinance the loans before they come due. Citigroup is trying to foreclose on 89 medallions, New York Community Bancorp put its taxi-loan portfolio up for sale, and credit unions with a combined $2.5 billion in medallion loans are suing the city for failing to stop Uber from stealing customers. Amid the turmoil, the value of a medallion has sunk to $770,000 from $1.1 million in 2013, according to data from the New York City Taxi & Limousine Commission.
Competition from New York's 26,000 Uber drivers has driven down meter revenue for the city's 13,600 medallion holders and their 50,000 operators. For many years, taxi medallions were a better investment than gold. Between 1980 and 2013, values soared more than 1,000 per cent while gold gained 181 per cent. The medallion's reliable cash flows meant lenders clamoured for access to the industry. All that changed with Uber. New York Community Bancorp said last year it would try to sell its $200 million taxi medallion lending business. It has yet to find a buyer.
Panic would be premature, said Alexander Twerdahl, an analyst with Sandler O'Neill & Partners LP in New York. By his count, only about 500 of the city's medallions, or about 3.7 per cent, are trading below their purchase price. That means that if banks foreclose, losses would be "insignificant," he said.
Still, the New York Supreme Court said last month that Citigroup's retail subsidiary could seize 89 medallions, valued at $31.5 million, from taxi tycoon Evgeny "Gene" Freidman, who buys medallions through companies with names like Bombshell Taxi and Vodka Taxi. Andrew Brent, a Citigroup spokesman, said legal action is "a last resort". An Uber spokeswoman declined to comment.
