The Port Authority of New York and New Jersey plans to sell $850 million of traditional taxable bonds next week to finance construction at the World Trade Center site.
The bond proceeds will be used to finance the ongoing construction of One World Trade Center, the site’s signature tower, as well as retail components and general infrastructure at the site.
The deal comes after Silverstein Properties Inc., which is developing its own towers on the site, re-escrowed $2.59 billion of Liberty bonds this month that originally were issued last year by the New York Liberty Development Corp. The private-activity bond program that Congress created following the Sept. 11, 2001, terrorist attacks expired in 2009.
Escrowing the bonds allows Silverstein to issue them as tax-exempt before it is ready to use the funds. The Port Authority allowed its $701 million allocation of tax-exempt Liberty bonds for WTC projects to expire in the hope that Congress would extend the program.
“We are still working with our congressional delegation to extend the deadline,” authority spokesman Steve Coleman said in an e-mail.
A staff member for Sen. Charles Schumer, D-NY, said the hope is that the extension will be voted on when Congress goes back into session next month.
“We are seeking an extension for Liberty bonds through 2011 so that all available financing options exist for the rebuilding of Ground Zero,” Schumer said in a statement.
The Port Authority expects to price the bonds on Oct. 20 but could price a day earlier if market conditions are favorable, according to Coleman.
The bonds will be offered in two series — Consolidated Bonds 164th and 165th series — each with a par of $425 million.
Citi will lead manage the deal. The authority uses its in-house bond counsel for debt transactions.
The bonds will be offered with a single 30-year maturity subject to mandatory redemptions every year from 2035 through 2040, according to the preliminary official statement.
The deal was structured this way because the authority was advised by its underwriter “that the taxable market prefers structuring term bonds with sinking fund maturities versus a serial maturity structure,” Coleman said.
The authority has budgeted $9.5 billion for redevelopment of the site. When completed, One World Trade Center will have 2.6 million square feet of space. The U.S. General Services Administration, which had a lease in the old Six World Trade Center building, has made a nonbinding commitment to lease 415,000 square feet in the new building.
Vantone Industrial Co. has agreed to lease 191,000 square feet for 20 years upon the building’s completion. Advance Magazine Publishers Inc., doing business as Conde Nast Publications, this year entered into a letter of intent to lease one million square feet of office space in the building for 25 years.
Last year the Port Authority cut its 2007-16 capital plan by $5 billion to $24.5 billion. The size of the capital budget may change again depending on whether or not New Jersey Gov. Chris Christie changes his mind about killing a commuter rail project known as the ARC tunnel. The authority was to provide $3 billion for the project before Christie pulled the plug when new cost estimates upped the anticipated price into a range of $11 billion to $14 billion from the prior estimate of $8.7 billion.
Since 2001, the authority has sold $5.83 billion of tax-exempt new-money bonds, $1.75 billion of taxable new-money bonds and $4.1 billion of new-money bonds subject to the alternative minimum tax, according to Thomson Reuters.
With the new issue, the agency will have approximately $13.42 billion of consolidated bonds outstanding.
Fitch Ratings and Standard and Poor’s rate the Port Authority’s outstanding consolidated bonds AA-minus. Moody’s Investors Service rates them Aa2. All three agencies assign stable outlooks.
