In the largest competitive sale scheduled this week, the New Jersey Economic Development Authority will sell $434.6 million of school facilities construction refunding bonds on Tuesday.
The deal is made up of $412.8 million of Series II bonds, which have maturities from 2015 to 2027, and $21.8 million of Series JJ bonds, which will mature in 2014 with federally taxable interest.
Proceeds from the sale will refinance outstanding school facilities construction bonds in order to reduce the authority’s debt service payments, a spokesperson said.
The NJEDA estimates a net present-value savings of $32 million from the refunding.
The school facilities construction bonds that will be refunded include Series 2002C, 2003F, 2004G, 2005O and federally taxable 2011FF and 2011HH.
Bond counsel is Hawkins Delafield & Wood LLP and financial advisor is Public Financial Management Inc.
The authority, created in 1974 under New Jersey’s Economic Development Authority Act, issues bonds to finance the cost of various facilities projects for school districts throughout the state.
Projects include the acquisition, construction or improvement of a school facility, and must meet various requirements for approval, including the adoption of capital and building plans.
The bonds are special limited obligations of the authority, and are payable from anticipated contract payments to be made by New Jersey from its general fund that are subject to appropriation by the Legislature.
Moody’s Investors Service cited the Economic Development Authority’s need for annual appropriation of the contract payments as basis for assigning an A1 rating to the bonds.
According to the preliminary official statement, in the event of a non-appropriation, there are no remedies.
Moody’s reported that almost 90% of the debt service on the state’s net tax-supported debt is subject to appropriation.
“The essentiality of the authority’s school facilities financing program, and the importance of maintaining access to the capital markets, provides strong incentive for the state to make these appropriations,” Moody’s added.
The EDA’s rating is notched off of New Jersey’s general obligation bond rating of Aa3, which reflects the state’s relatively weak financial position, relatively slow economic recovery and lack of a specified plan to rebuild fund balances, Moody’s said.
Both the authority’s bonds and New Jersey’s GOs are assigned stable outlooks.
Similarly, Fitch Ratings assigned the bonds and notes an A-plus rating — one notch below New Jersey’s GO rating of double-A minus — since payments must be appropriated annually by the Legislature. The outlook is stable.
Standard & Poor’s analysts assigned an A-plus rating to the refunding bonds Thursday, and also assigns a stable credit outlook.