The New Jersey Economic Development Authority is selling $2.2 billion in bonds next week marking the largest deal in the municipal market so far in 2015.
The bonds, rated A3 by Moody's Investors Service and A-minus by both Standard and Poor's and Fitch Ratings, are designed to bring $500 million of new money to the NJEDA, according to the New Jersey Department of the Treasury. The state also plans to convert $242 million of floating rate notes from short-term variable rates to fixed rates and to finance the termination of interest-rate swap agreements.
The securities scheduled for the Aug. 25 calendar are being sold in three series of bonds priced by Bank of America Merrill Lynch.
The $500 million Series WW and $1.159 billion Series XX for retail are tax-exempt school facilities construction bonds and refunding bonds. Series YY consists of $574 million in taxable school facilities construction refunding bonds.
New Jersey Treasury spokesman Christopher Santarelli said the swap exits the deal finances include derivatives inherited by Gov. Chris Christie that totaled over $4 billion in 2010 that were considered “toxic” by the Republican governor and market participants. Santarelli emphasized that the state has not entered into any new swap agreements since Christie took office in 2010.
“The State saw an opportunity to fully rid its balance sheet of these swaps at the end of the last fiscal year, and did so,” said Santarelli. “Debt savings were used to cover the approximately $720 million in costs to exit these derivatives. This action has been cited as credit strength by rating agencies.”
The NJEDA also sold $2.2 billion in school facilities and construction refunding bonds and notes in January 2013.
Moody’s rates the NJEDA them one notch below New Jersey’s A2 general obligation rating citing that contract payments backing the securities are subject to annual legislative appropriation. The state’s was downgraded notch to A2 by Moody’s in April because of ongoing budget and pension funding challenges.
