N.J. Turnpike OKs Switch to Pool of 32 Investment Banks

The New Jersey Turnpike Authority will now use a pool of 32 investment banks when it issues debt rather than reviewing underwriter proposals each time it heads to market.

The authority's board yesterday approved the pool of 32 firms along with a $481 million operating budget for fiscal 2009, which began Jan. 1. Having a group of bankers readily available to structure bond and note deals will help the NJTA access the market more rapidly as it begins its $7 billion, 10-year capital plan.

The group of underwriters is not separated between senior and co-senior firms, according to Dennis Enright, a principal at NW Financial, the authority's outside financial adviser.

"It's just one pool," he said. "They haven't done pools in the past. They've done procurements for each issue, but with timing and market volatility they decided they wanted to do a pool so they could select people with relative ease."

The authority, which oversees the 148-mile New Jersey Turnpike and the 173-mile Garden State Parkway, needs to issue more debt during the coming years to support a nearly $3 billion road-widening project on the turnpike and shoulder expansions on the parkway. The agency implemented a toll increase Dec. 1 and will raise tolls again in 2012.

"They didn't have this 10-year program where they're going to be borrowing all the time," Enright said. "[Before], it was just an occasional borrowing."

The NJTA plans to sell up to $1 billion of new-money debt this year for its capital improvements. Enright said the authority may issue "several hundred million" dollars of new-money bonds in April. Officials have yet to select an underwriting team from their new pool.

Before the new-money transaction, the authority is looking to price $225 million of bonds next week to refinance its Series 2003D auction-rate securities insured by Financial Security Assurance Inc. into weekly variable-rate mode. The deal will be comprised of four tranches, with Morgan Stanley pricing Series 2009A and Series 2009C for $87.5 million and $43.7 million, respectively, and Citi pricing Series 2009B and Series 2009D for $50 million and $43.7 million, according to a Moody's Investors Service report. The auction-rate securities are unhedged and unattached to a swap agreement.

JPMorgan Chase Bank NA will provide a letter of credit on the Series 2009A bonds, and the 2009B bonds will carry an LOC from PNC Bank NA, with those enhancements expiring in three years. The Bank of Nova Scotia will offer a two-year LOC on the 2009C and 2009D bonds.

Wilentz, Goldman & Spitzer PA is bond counsel for the authority.

Along with the approved list of 32 investment firms, the board agreed to renew the authority's contract with NW Financial, which has been advising the NJTA for six years, according to Enright. The new contract is for three years, with two one-year optional extensions at the authority's decision. The agency will continue to pay NW Financial $75,000 per year, the same fee the firm was already receiving.

The board also signed off on an $841 million operating budget for fiscal 2009, which is the same size as its fiscal 2008 budget. Officials implemented spending cuts and reductions in the NJTA's payroll to keep fiscal 2009 expenditures level, according to spokesman Joe Orlando.

"The bottom line is [Gov. Jon Corzine] asked for a flat budget, so it took some doing," Orlando said. "There are cuts in some departments, we've eliminated positions that we said we were going to eliminate back in November when we did the toll increase, we've taken away cars. These are all things that the governor requested that we do."

The NJTA carries A and A3 underlying ratings from Fitch Ratings and Moody's, respectively, both with a stable outlook. Standard & Poor's rates the authority A with a positive outlook.

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Transportation industry
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