New Jersey is juggling two different underwriting-selection processes as it prepares for a new-money Transportation Trust Fund Authority deal and a general obligation refinancing.
Officials are seeking proposals for investment banking services for the new-money TTFA transaction, which is set to price in the third quarter of 2010. Responses are due by June 22.
While the authority’s capital plan authorizes $1.6 billion of new-money borrowing for fiscal 2011, the RFP anticipates selling $1.4 billion of debt in two transactions in fiscal 2011, which begins July 1. Officials are still working on the size of the summer deal and whether it will include a refunding component.
“The actual size will be the result of current market interest rates based upon your firm’s debt capacity and refunding models,” according to the RFP.
The state anticipates a second TTFA new-money sale in January or February.
New Jersey refundings must generate at least 3% net present-value savings and cannot extend maturities. A potential refunding could give the authority more borrowing flexibility.
Fiscal 2011 is the fund’s final year of new-money capacity. Beginning in fiscal 2012, the TTFA’s entire $895 million state allocation will go towards debt-service costs on outstanding debt. The agency had $11.1 billion of outstanding debt as of May 31.
Firms should not include capital appreciation bonds or convertible CABs in their submissions. The RFP asks banks to include sale and distribution experience with New Jersey debt, including taxable Build America Bonds.
Firms must also identify any book-running experience with BAB transactions that include a 10-year par call, serialized maturities, and that used designation pricing — where institutional customers select which banking firms participating in the transaction get sales fees — rather than group pricing, which assigns sales fees to the bank with the highest liability.
New Jersey Treasury Department officials are now reviewing underwriting proposals, which were due last week, for a GO refinancing deal set to price in the fourth quarter of 2010. The department received a total of 47 responses, including 22 firms seeking to act as senior manager on the transaction, according to James Petrino, director of the Office of Public Finance.
The Treasury aims to select a book-runner for the GO refinancing sale by the end of the month, he said.
