The Newark Housing Authority will sell nearly $178 million of lease revenue bonds in early February to finance the finishing touches on the Newark Prudential Center, a 17,500-seat arena scheduled to open in the fall and host hockey’s New Jersey Devils.
The transaction involves a roughly $170 million refunding of the callable portion of Series 2004 bonds, which are backed by annual lease payments of $12.5 million that the NHA receives from the Port Authority of New York and New Jersey.
Siebert, Brandford, Shank & Co. could price the deal as early as the week of Feb. 5, according to Newark business administrator Bo Kemp. Goldman Beale Associates is financial adviser and Gluck Walrath LLP is bond counsel. MBIA Insurance Corp. will insure the debt.
Standard & Poor’s rates the sale AA-minus. Fitch Ratings and Moody’s Investors Service do not rate the credit.
Officials say the fixed-rate deal will save the issuer from $7 million to $12 million over the life of the debt, depending upon market conditions. The city will then take the savings to back new-money debt.
“They’ve elected to issue additional bonds to use up those savings,” said Neil Grossman, an adviser at Goldman Beale.
The new-money proceeds will finance the final construction phase of the new $375 million arena that will house the National Hockey League’s New Jersey Devils in the state’s largest city. The concluding projects include construction of exterior parks and an outside entrance plaza, along with upgrades to adjacent streets.
Construction on the arena began in fall 2005. Earlier this month, Devils Arena Entertainment, an affiliate company of the team, entered into a naming-rights agreement with Prudential Financial Inc. The company will pay $100 million over 20 years for the naming rights, Kemp said.
Both the city and the Devils contributed to financing the area, with Newark investing about $210 million and the team’s ownership group supplying the remaining $165 million, according to the team’s Web site. Officials say the arena is a major piece in the revitalizing Newark’s downtown area by creating jobs and sparking business growth.
While Newark is home to five universities, including Rutgers University, and Prudential Insurance, the city continues to have challenges with 22.9% of the city’s families living below the poverty level, more than double the national percentage of 10.2%, according to 2005 U.S. Census data.
In 2002, Newark and the Port Authority amended their original 1947 lease agreement, with the Port Authority agreeing to pay $12.5 million annually to the city for the use of marine and air terminals at the Newark airport. At that time, the city assigned the payments to the NHA, Kemp said. The lease agreement ends in 2036, which is also the final maturity for the bonds.
Citigroup Investment Banking priced the Series 2004 bonds with a par amount of $200.4 million on June 10 with paper maturing from 2005 through 2037 with yields ranging from 1.5% with a 3% coupon in 2005 and 5.3% with a 5% coupon in 2037.
