In Corzine’s Last Hurrah, N.J. Readies Four Deals for $700M

New Jersey will issue more than $700 million of combined new-money and refunding debt in four sales next week to help finance transportation projects, open space initiatives, and clean water programs.

The deals could be outgoing Gov. Jon Corzine’s last major borrowing initiative before Governor-elect Chris Christie — who has spoken out against borrowing in light of the state’s heavy debt load — takes office on Jan. 19. New Jersey has more than $32 billion of outstanding debt.

The New Jersey Transportation Trust Fund Authority Tuesday will sell $150 million of variable rate, new-money bonds. The transaction will help finance road and bridge projects and also address a portion of floating-to-fixed-rate swaps the TTFA has that are currently attached to fixed-rate debt. The $345 million of floating-to-fixed-rate swaps originally were attached to auction-rate securities that the authority last year refinanced into fixed-rate debt.

JPMorgan will supply a letter of credit on the $150 million deal. Citi is the senior manager. Windels Marx Lane & Mittendorf LLP is bond counsel.

The Series 2009C term bonds will mature in 2032, according to the preliminary official statement. Moody’s Investors Service rates the deal A1 with a negative outlook. Standard & Poor’s rates it AA-minus with a stable outlook.

The authority’s board is set to vote on another $150 million variable-rate deal on Tuesday, with Sumitomo Mitsui Banking Corp. offering a letter of credit on that transaction, according to Nancy Feldman, the state’s public finance director. That deal could price before the end of the year under a best-case scenario, she said.

Officials continue to work on the remaining $45 million of floating-to-fixed-rate swaps now connected to fixed-rate debt.

“We’re talking to another bank. We don’t have it to the point of going to the board, but we’re hoping to do that soon,” Feldman said.

The TTFA bonds are secured by dedicated revenues that the Legislature appropriates to the authority each year. Beginning in fiscal 2012, the program’s typical $895 million annual appropriation will need to cover debt service payments and the fund, as of now, does not have new-money bonding capacity beginning in fiscal 2012.

While the TTFA anticipates issuing $1.6 billion of new-money debt in fiscal 2010, which began July 1, borrowing capacity in fiscal 2011 will depend upon the interest rates the authority receives at that time.

“There are a number of limitations under the existing statute that sets their authorization through fiscal year 2011 and our debt-service target — which is not set by legislation but more by practice — at $895 million,” Feldman said. “So that combination of time and appropriation limitations will determine if the full amount of borrowing capacity can be issued during those two years.”

Along with the transportation borrowing, the state will competitively sell $209.1 million of general obligation bonds on Tuesday. The sale consists of $205 million of tax-exempt debt with serial maturities running from 2011 through 2030, according to the POS. Another $4.15 million of taxable bonds will mature in years 2011 through 2014.

McCarter & English, LLP is bond counsel.

Moody’s and Fitch Ratings anticipate releasing their rating on the transaction on Friday. Standard & Poor’s may release its rating Friday or next week.

Bond proceeds will help finance drinking water projects, open-space preservation, and storm water, sewer, and wastewater treatment projects, according to the POS.

Prior to the GO sale, the state anticipates competitively selling on Monday $325 million of tax and revenue anticipation notes that will mature on June 24. The notes will help the state with cash-flow needs until it receives tax revenue in April.

Wilentz, Goldman & Spitzer PA is bond counsel on the short-term deal. Standard & Poor’s and Moody’s rate the note sale SP1-plus and MIG-1, respectively. Fitch will release its rating Friday.

In addition, the New Jersey Economic Development Authority Wednesday will issue $27.1 million of taxable refunding bonds to refinance Series 1996A and Series 1997C New Jersey Performing Arts Center Project bonds, according to the POS. The debt is secured by lease payments that the state pays to the EDA.

McCarter & English is bond counsel.

The bonds will mature from 2012 through 2016, according to the POS.

Fitch and Standard & Poor’s rate the refunding debt A-plus and AA-minus, respectively. Moody’s rates the transaction A1 with a negative outlook.

Feldman said her team continues to evaluate restructuring opportunities to lower debt service payments for this fiscal year. No other bond or note sales are set as of now.

“There are no other scheduled transactions,” Feldman said. “We’re continuing to look at our needs regarding our debt-service reduction plan and the timing on those, but there is nothing scheduled or anticipated after the group [of borrowing] next week.”

The transactions come as the state is dealing with a more than $1 billion budget shortfall for fiscal 2010 due to underperforming revenues, according to the GO deal’s POS. Corzine has directed his cabinet to identify $400 million of spending reductions beyond an initial $250 million spending decrease.

In addition, Corzine plans to cut school and municipal aid, and allocations to higher education, hospitals, and the state’s pension contribution by a combined $400 million, according to the POS.

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