New Jersey is seeking investment banking services for a general obligation refinancing as it also gears up for a new-money transportation deal this summer.
Responses to the RFP for the refinancing are due June 8. The request includes senior manager, co-senior manager, and co-manager positions. Officials aim to price the deal late August or early September, according to James Petrino, director of the Office of Public Finance.
The anticipated deal will restructure previous bonds to reduce debt-service costs in fiscal 2011, which begins July 1. The fiscal 2011 budget proposal includes an expected $410 million of debt-service savings, including $175 million from GOs.
Officials are halfway to achieving the $410 million goal after the state on April 22 refinanced New Jersey Economic Development Authority school construction bonds. The transaction reduced debt-service costs next year by $208 million. The state pays down its school construction bonds through appropriations from the general fund.
“If we could get the rest of the way there with the GO deal, that would be wonderful,” Petrino said. “If we can’t, then we’ll have to look at some of our outstanding authority bonds that have some sizeable amortizations in 2011 to complete the targeted savings.”
The RFP asks underwriters to list prior debt restructuring experience and to offer ideas and quantitative analysis for potential GO restructurings that would minimize debt service. Firms are required to include risks in such a transaction and “any key dates or market timelines that may affect the ability to execute a transaction(s) in that regard.”
The deal is subject to market conditions, since New Jersey’s refinancings must include positive net present-value savings, pursuant to the state’s Refunding Bond Act of 1985.
“We think there’s a good, reasonable-size restructuring that can occur and provide present-value savings,” Petrino said. “If market conditions were to deteriorate or change in ways that take that away, then we would not be able to go forward with that. So, we’re a little bit vulnerable to the market. The market will dictate the size and the scope of the restructuring.”
In addition to the GO restructuring, the state is planning a new-money New Jersey Transportation Trust Fund Authority deal in August, according to Department of Transportation officials. The Treasury Department has yet to release an RFP for banking services for the TTFA sale. Officials are still working on the size of that new-money deal.
The DOT Wednesday released its fiscal 2011 capital budget plan, which is financed in part with TTFA bond proceeds. The Legislature will now weigh in on that proposal. Fiscal 2011 begins July 1.
The capital budget includes $1.6 billion of TTFA borrowing, which is higher than earlier estimates. Last month, DOT commissioner James Simpson said the state may include $1.43 billion of bonding in the fiscal 2011 capital plan.
Along with the $1.6 billion of TTFA bond proceeds, the $3.5 billion plan includes $1.72 billion of federal funds and $220 million from “other sources.”
The capital plan supports DOT infrastructure projects along with New Jersey Transit capital improvements. The DOT will receive $2.19 billion for bridge upgrades, road expansions, resurfacings, and safety programs. NJTransit will gain $1.35 billion for state-of-good-repair projects, bus replacement purchases, track upgrades, and other capital needs.
NJTransit’s expansion projects will receive $300 million. Those projects include the new passenger-rail tunnel that will run from Newark to midtown Manhattan, the Portal Bridge project, and the Hudson-Bergen light-rail extension.