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N.J. to Borrow $200 Million Amid Incoming Governor’s Opposition
Bloomberg
December 8, 2009
By Michael McDonald and Terrence Dopp
Dec. 8 (Bloomberg) -- New Jersey, the third-most indebted U.S. state, will sell more than $200 million in bonds today to finance voter-approved capital projects a week after Governor- elect Christopher Christie said he opposed borrowing more money.
The state will issue $209.1 million of bonds, including $205 million of tax-exempt securities, the largest such competitively bid offering in the market today, according to Bloomberg data. Christie, a Republican who defeated Democratic incumbent Jon Corzine last month, said he opposed new bond sales after the state last week detailed $2.7 billion in borrowing it plans for the remainder of the fiscal year, which ends in June.
“General obligation bond sales are only conducted when the various agencies and authorities present the state with a list of projects that need funding,” said Tom Vincz, a spokesman for Treasurer David Rousseau, a Corzine appointee. “That’s how sales are scheduled and that’s the way it’s always been done.”
The state’s bond sale today will finance clean water and open-space preservation projects, according to a preliminary official statement. The state is also planning to sell $1.4 billion of bonds for transportation and $1.1 billion for school construction before June 30, according to a Nov. 30 report.
Christie, 47, a former U.S. attorney, told Bloomberg News last week that New Jersey “can’t have any more debt” and that any projections for borrowing will be “rendered meaningless” when he takes office on Jan. 19. He declined additional comment yesterday through his spokeswoman, Maria Comella.
Tax-Supported Debt
New Jersey has $36.5 billion of gross tax-supported debt, the third highest of the 50 states, according to a report released in July by Moody’s Investors Service. Moody’s rates the state’s bonds Aa3, the fourth highest ranking. California has the most, at $75.2 billion.
New York City is leading the municipal market this week as issuers seek to borrow more than $10 billion, according to Bloomberg data. New York, the largest borrower among U.S. cities, is selling $1.4 billion of taxable and tax-exempt securities, including $616 million of Build America Bonds. By yesterday, the city had taken orders from individual investors for $440 million of the tax-exempt bonds, and for $20 million in Build America Bonds that it expects to finish pricing on Dec. 10, according to Ray Orlando, a spokesman for the city Office of Management and Budget.
Yields on conventional 20-year municipal debt fell to an eight-week low of 4.24 percent, down 1.34 percentage points from a year ago, according to a weekly Bond Buyer index.
“Typically December and January are pretty strong months because of all the reinvestment” from bondholders in the municipal market getting coupon payments and proceeds from maturing securities, said Robert Macintosh, a portfolio manager at Eaton Vance Management in Boston, which oversees $17 billion of municipal bonds. The market “feels firm even with a fair amount of supply,” he said.
Following are descriptions of additional pending sales of municipal bonds and notes; the timing and amounts may change.
DISTRICT OF COLUMBIA, the U.S. capital, plans to sell $646.8 million of revenue bonds secured by income taxes on individuals and businesses. A group of banks led by JPMorgan will underwrite the sale this week, including $600 million of Build America Bonds. The rest are tax-exempt securities. Proceeds will fund improvements to schools, parks, municipal buildings, mass transit and community infrastructure. Washington has sold about $1.1 billion this year of an almost $3 billion authorization of income-tax secured bonds, a new credit intended to get lower interest rates than general obligation debt by dedicating specific revenue for repayment, according to Fitch. They are rated AAA by S&P, AA by Fitch and Aa2 by Moody’s. (Updated Dec. 7)
MASSACHUSETTS SCHOOL BUILDING AUTHORITY intends to sell $500 million of Build America Bonds and $100 million of tax- exempt bonds this week through underwriting firms led by Ramirez & Co. and Bank of America Corp.’s Merrill Lynch. The proceeds from the bonds, backed by dedicated sales tax revenue, will fund grants to school districts for construction and renovations. Moody’s rates the bonds Aa2. Fitch ranks them AA. (Added Dec. 7)
MARYLAND TRANSPORTATION AUTHORITY wants to sell about $550 million of transportation facilities project bonds backed by toll revenue from three bridges, two tunnels and a portion of Interstate 95 between Baltimore and Delaware. Investment banks led by Goldman Sachs Group Inc. are to underwrite the deal this week. The issue is rated Aa3 by Moody’s and AA- by S&P and Fitch. Almost $482 million of the securities will be taxable Build America Bonds. The deal will help finance construction of the $2.6 billion Intercounty Connector, a six-lane limited- access toll road linking Interstate 270 and I-95 in the Washington suburbs. (Updated Dec. 7)
ILLINOIS plans to offer almost $530 million of federally tax-exempt bonds to fund capital projects under the state’s Build Illinois program. Underwriters led by Cabrera Capital Markets LLC will negotiate the sale of $375 million of the debt, secured by a first priority pledge of sales tax revenue. Banks will place bids Dec. 10 to underwrite an additional $154.9 million, preliminary bond documents show. (Added Dec. 3)
BROOKLYN ARENA LOCAL DEVELOPMENT CORP. intends to issue $500 million of tax-exempt bonds to help finance construction of a new facility in New York City for the New Jersey Nets, which set a National Basketball Association record this month for the worst start to a season. The debt, rated at the lowest investment grades by Moody’s and S&P, will be backed by payments in lieu of property taxes, known as Pilots, derived from arena revenue. Forest City Ratner Cos. is developing the arena, Barclays Center, as part of the Atlantic Yards project in the city’s most populous borough. Underwriters led by Goldman Sachs and Barclays Plc are handling the bond sale. (Added Dec. 4)
PENNSYLVANIA TURNPIKE COMMISSION, operator of the U.S.’s oldest turnpike, plans to take retail orders on $374 million in fixed-rate bonds today and will take institutional bids Dec. 9. The refunding bonds, backed by a senior lien on revenue from the Pennsylvania Turnpike system, will raise about $50 million to cover the cost of termination payments on interest-rate swaps, according to Nick Grieshaber, chief financial officer. The fixed-rate sale through Morgan Stanley follows last week’s Turnpike Commission sale of $208 million in variable rate bonds. The bonds are rated Aa3 by Moody’s and A+ by Fitch and S&P. (Updated Dec. 8)
NORTH TARRANT EXPRESS MOBILITY PARTNERS plans to sell $400 million of tax-exempt debt this month through the Texas Private Activity Bond Surface Transportation Corp. The borrower is a group led by Madrid-based Grupo Ferrovial SA’s Cintra Concesiones de Infraestructuras de Transporte SA, which Texas awarded the concession to rebuild and operate a highway northeast of Fort Worth. The bonds will be secured by toll revenue from the North Tarrant Expressway, including rebuilt highways Interstate 820 and State 121/183 near Dallas-Fort Worth International Airport. Fitch rated the bonds BBB-, while Moody’s ranked the issue Baa2, one step higher. The $2 billion cost of redeveloping the 13-mile (20.9-kilometer) stretch of highway will be covered by the private-activity bond proceeds, a $650 million federal transportation loan, about $570 million in gasoline tax revenue from the state, and $420 million in equity invested by Cintra and others. (Added Dec. 7)
HARRIS COUNTY, TEXAS, which operates about 115 miles of toll roads in and around Houston, plans to raise $350 million by selling a mix of taxable Build America and tax-exempt bonds this week through banks led by Goldman Sachs. Harris, the third-most populous county in the U.S. after Los Angeles and Cook County, Illinois, will offer debt backed by a senior lien on revenue from the toll road system to fund projects. The securities are rated AA- by S&P and Fitch. (Added Dec. 7)
DENVER PUBLIC SCHOOLS, the second-biggest school district in Colorado by enrollment after Jefferson County Public Schools, this week plans to sell $225 million of Build America Bonds and $24.4 million of tax-exempt bonds. Underwriters led by George K. Baum & Co. will handle the deal. S&P assigned its AA- rating to the general obligation borrowing by Denver City and County School District No. 1, which has about 75,000 students. (Added Dec. 7)
MICHIGAN, whose October unemployment rate of 15.1 percent was the highest among U.S. states, will negotiate the sale of $1.3 billion in tax-exempt general obligation notes due in September 2010 to investors through JPMorgan, preliminary bond documents show. The deal will help the state cover cash expenses until tax revenue arrives in the fiscal year that began Oct. 1. The notes are rated MIG 1 by Moody’s and SP-1+ by S&P. (Added Dec. 3)