The New Jersey Turnpike Authority yesterday approved $500 million of long- and short-term borrowing to help it address auction-rate debt.

While officials continue to work on roughly $800 million of auction-rate securities, the NJTA expects to release a request for proposals in the next few days in search of underwriters on approximately $1 billion of new-money borrowing slated for 2009, according to Dennis Enright, a principal at NW Financial Group, the authority's financial adviser.

Those new-money proceeds will help support 35 miles of road widening on the New Jersey Turnpike to help unclog traffic congestion through the middle of the state. Officials will also add an additional lane along a portion of the Garden State Parkway and expand shoulder width to help absorb vacation travelers in southern New Jersey. Improvements also include bridge rehabilitation projects, according to the NJTA's 2009 strategic plan.

In looking at the agency's auction-rate securities, officials expect to refinance by the end of this month $225 million of Series 2003D bonds and convert the securities into variable-rate demand bonds. The Series 2003D bonds are insured by Financial Securities Assurance Inc.

Citi and Morgan Stanley will price the bonds, which will carry a letter of credit from JPMorgan Chase and PNC Capital Markets LLC and a third bank which Enright declined to name, as that LOC is still in the works. Wilentz, Goldman & Spitzer PA is bond counsel for the authority.

Earlier plans to convert the Series 2003D bonds into VRDBs stalled when the authority failed to secure liquidity providers on the deal, according to Enright.

The NJTA has another $575 million of auction-rate securities, of which $400 million are swapped into a synthetic fixed rate through a five-year constant maturity swap.

Officials plan to sell roughly $275 million of notes in January that will not only roll over a previous note deal but help the authority bid on a portion of the $575 million of auction-rate securities. Enright said the $400 million of ARS are not as costly for the authority as the unhedged auction-rate debt.

"It's a positive return for us, so we don't have to buy those," Enright said. "It's only the $175 million that we're trying to buy and the others we might buy selectively, if we can bring the rate down."

Goldman, Sachs & Co. will serve as underwriter on the note sale. The NJTA can use a portion of the net proceeds for capital projects, if it so chooses.

Along with the borrowings, the board approved an annual revenue projection plan which pegs the authority's debt service coverage at 1.65 times for 2009, up from 1.3 times in 2008. Under its bond agreements, the NJTA must maintain debt service coverage of at least 1.2 times. A recent toll hike on the turnpike and the parkway that began on Dec. 1 helped boost debt service levels. The next toll boost is set for 2012.

That increase in debt service coverage prompted Fitch Ratings to revise NJTA's outlook to stable from negative. Fitch rates the authority A. Standard & Poor's and Moody's Investors Service rate the credit A and A3, respectively. The authority has roughly $4.8 billion of outstanding debt.

A portion of the additional toll revenue will help support a new $8.7 billion passenger-rail tunnel that will run from Newark to Manhattan's Pennsylvania Station. Construction is set to begin by fall 2009.

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