A $1.6 billion Liberty Development Corporation nonrated financing for the 3 World Trade Center Tower project will thunder into the primary market this week, giving investors a rare opportunity to grab triple-exempt, high-yield bonds from a large specialty state, municipal sources said.
The nonrated deal — the largest on record for the municipal market, according to Bloomberg — will be priced by Goldman, Sachs & Co. on Tuesday.
The offering is part of the $5.83 billion of volume predicted by Ipreo LLC and The Bond Buyer. That's down from the revised $7.69 billion that actually came to market last week as reported by Thomson Reuters.
"There's an awful lot of credit work going into the transaction," said a New York source close to the deal.
Despite the risks of speculative paper — and its concentration of 30-year term bonds — the transaction should appeal to the wide variety of buyers who were shopping the deal on Friday afternoon, the source said. He said traditional buyers will focus on Class 1 and 2 bonds, while the non-traditional municipal investors will gravitate toward the Class 3 bonds.
"There is a lot of attention and people are excited about it," he said on Friday. The bonds are secured by a mortgage on the building, tenant leases and rents.
"Definitely high yield buyers both in the muni space and other asset classes will be interested in the deal," the New York source said.
It comes on the heels of last week's $1 billion sale of revenue refunding bonds from the San Joaquin Hills, Calif., Transportation Corridor Agency -whose Series A senior lien bonds and Series B junior lien bonds are rated BBB-minus and BB-plus by both Standard & Poor's and Fitch, respectively.
The senior lien bonds were priced on Thursday and ranged in yield from .60% in 2016 to 4.45% in 2050.
On the same day the bonds were priced, the triple-A generic obligation scale in 2044 yielded a 2.99%, according to Municipal Market Data.
"It's going to offer yield that is very difficult to achieve in the muni market right now for something that is triple tax exempt," the New York source said.
The deal is being issued for the 80-story tower — and is the largest issue without a rank from the three largest rating companies in Bloomberg data going back to 1990.
Liberty Bonds for 7 World Trade Center were also issued without ratings, and then refinanced into commercial mortgage-backed securities.
The federal Liberty Bond program was created after the 2001 terrorist attacks to revive Lower Manhattan with $8 billion of tax-free financing.
In other activity this week the Illinois State Toll Highway Authority will sell $400 million of toll highway senior revenue bonds in a negotiated deal being priced by Morgan Stanley & Co. on Thursday.
The bonds are rated Aa3 by Moody's Investors Service, and AA-minus by Standard & Poor's and Fitch Ratings.
The California Earthquake Authority is planning to issue $350 million of revenue bonds that are federally taxable on Tuesday, following indications of interest on Monday by senior book runner Goldman.
