Officials anticipate blending fixed-rate bonds and floating-rate debt to grab a lower all-in borrowing cost on $1.28 billion of tax-exempt Liberty revenue bonds that will help finance construction at the World Trade Center.
On April 13 or 14, Goldman Sachs & Co. will price $900 million of fixed-rate New York Liberty Development Corp. Liberty bonds followed by a $375 million variable-rate transaction, said Marvin Markus, managing director of public sector and infrastructure banking at Goldman.
The deal will help finance construction of Tower 4 at the World Trade Center site. The Port Authority of New York and New Jersey owns the land and the building. Silverstein Properties Inc. is the developer.
The Series 2011A bonds will defease a portion of debt sold in 2009. Those Series 2009A bond proceeds currently sit in escrow but Silverstein would like to tap into the funds for construction costs.
The LDC planned to do the transaction in December using only fixed-rate debt, but a spike in interest rates forced officials to postpone the deal. Silverstein and the Port Authority aimed to borrow at a rate in the 5% range, according to Markus.
That would be challenging given current market conditions and the idea is to incorporate $375 million of floating-rate debt into the transaction in order to lower the overall borrowing cost and get the deal back into the 5% scale.
“The feeling was that with a modest amount of floating-rate debt in the capital structure — approximately 30% — that it was a structure that would work,” Markus said. “And it would result in an all-in interest rate, when you combine the two, closer to the originally expected level when the Port Authority and Silverstein agreed to the transaction in 2010.”
Officials are still deciding whether to offer a retail-order period. The Series 2011A bonds include $133.3 million of debt maturing in 2031, $411.5 million maturing in 2041, and $355 million maturing in 2047, according to the preliminary official statement that was issued Friday.
Markus said the LDC is not currently contemplating using bond insurance, but would take a look at enhancing the deal if investors are interested.
The $375 million floating-rate bonds will carry a standby bond purchase agreement with JPMorgan Chase Bank NA as the liquidity provider, according to the POS.
The LDC is issuing the debt on behalf of Silverstein, with rental payments repaying the bonds. The Port Authority has leased the 63-story tower to Silverstein for 90 years and the bi-state agency will rent 600,766 square feet of space in the building.
New York City will rent an additional 581,642 square feet of space, leaving more than 600,000 of available office space.
Along with the $1.27 billion of combined fixed-rate and floating-rate debt, officials plan to issue in the future $80 million of “completion bonds” that could be used to help finance Tower 4 or another building at the site, Tower 3, Markus said.
The LDC will also re-escrow more than $1.2 billion of Liberty bonds sold in 2009 to help finance the 62-story Tower 3. The LDC will then refund the Tower 3 bonds in early to mid 2012, according to Markus.
Silverstein is the developer for Tower 3 and another building, Tower 2.
Congress created the Liberty Bond Program following the terrorist attacks of Sept. 11. The bonds help finance the redevelopment of the World Trade Center and lower Manhattan.