The largest holder of New York City taxi-medallion loans is throwing lifelines to thousands of drivers struggling to survive a collapse in ridership caused by the new coronavirus pandemic.
Marblegate Asset Management LLC, a Greenwich, Conn., investment firm, has given about 2,000 medallion-owner drivers a loan payment holiday every month since mid-March. It has also continued a process that began last year of writing down medallion loans, in some cases deducting hundreds of thousands of dollars from struggling drivers’ debts to a ceiling of about $300,000.
Andrew Milgram, managing partner and chief investment officer of Marblegate said in an interview that Marblegate has so far forgiven $70 million of $215 million in debt attached to 483 medallions. About half of that debt, Mr. Milgram said, was restructured after New York City shut down because of the coronavirus pandemic.
Mr. Milgram said that average monthly payments for the loans that have been restructured have been reduced to about $1,500 from $2,800.
“We are constantly working to restructure loans because we believe it is the best approach to stabilize the industry, bolster drivers’ long-term economic prospects, and return value to our investors,” he said.
Marblegate became the largest holder of New York City taxi-medallion loans by scooping them up at a discount before the pandemic struck in March.
A medallion is a metal shield affixed to a vehicle’s hood that licenses drivers to pick up street hails across New York City. For years, medallions were seen as a safe investment and a pathway for immigrant drivers to achieve the American dream.
Many drivers borrowed against the value of their medallion to buy a home, put their children through college or purchase a new taxi. Between 2002 and 2014, medallion values rose to $1.3 million from $200,000.
However, risky lending practices as well as competition from an influx of tens of thousands of app-based ride-sharing drivers subsequently caused values to fall back below $200,000.
There are roughly 13,500 medallions in New York. Marblegate owns about 4,000 loans on medallions. It also runs several hundred licensed vehicles from a garage in Long Island City, Queens, giving the firm an insight into drivers’ earning potential.
Driver advocates are skeptical of the hedge fund’s actions. In late July, more than 100 taxis drove in convoy to Marblegate’s offices in Greenwich calling on the firm to cut loans to $125,000 and to reduce monthly repayments to about $750.
Bhairavi Desai, executive director of the New York Taxi Workers Alliance, said $300,000 is too much for drivers to afford. “They feel like they’ve been given a life sentence with this debt,” she said.
Mr. Milgram said restructuring debts to a maximum of $300,000 is manageable for drivers given their earning potential.
The taxi and for-hire vehicle industry experienced a massive decline in ridership after New York City schools and businesses closed because of the pandemic.
More than three-quarters of taxicabs were taken off the streets by April, according to a report by the city’s Taxi and Limousine Commission. Average gross weekly driver earnings for those who were on the road this June were $813, according to the report, a 37% decrease from the same month last year.
Demand for rides has been particularly low in parts of the city upon which yellow cabs have traditionally relied for business. Most office workers still haven’t returned to Manhattan’s central business district and airline passenger numbers at the city’s major airports were down 82% in August from a low of about 98%.
Balwinder Singh, who is 63 years old, said he couldn’t afford to restructure his loan even if he wanted to. He is currently making about $1,500 a month after expenses, he said, down from roughly $3,500 a month before the pandemic.
Mr. Singh bought his medallion for $170,000 in 1996. As the value of the medallion rose, he borrowed against it to buy a house and to put his three children through college. At one point, he owed $800,000.
Mr. Singh said a loan-service agent acting on behalf of Marblegate offered to reduce his debt to $300,000 from $600,000. The debt restructure would have cut Mr. Singh’s monthly loan repayments to $1,700 from $4,300, he said. But he didn’t have the $25,000 cash needed to finance the restructuring.
Mr. Singh said that even if he could find that sum, he isn’t interested in paying because he believes his medallion is worth less than $100,000.
Naveed Tahseen, a 58-year-old driver from Brooklyn, borrowed $25,000 from family and friends for the cash payment to reduce his loan, which is owned by Marblegate, to $300,000 from $600,000.
He said his monthly loan repayments have been reduced to about $1,800 from almost $4,000 and that the restructuring had given him hope that he could survive the pandemic.
Mr. Tahseen said he is currently grossing about $250 a week, but he hopes to get back to making up to $150 per night as the city recovers.
“I have to stay working for a living,” he said.
Write to Paul Berger at Paul.Berger@wsj.com