New Jersey is looking for swap advisory services to help it monitor and address its $3.3 billion derivative portfolio.
Lamont Investment Advisers Corp. currently is New Jersey’s swap monitor and derivative consultant. That contract will expire at the end of February, said Jim Petrino, director of the Office for Public Finance. The state will select one firm to provide both monitoring and consulting work or else divide the two functions between two swap advisers.
Responses to the request for proposals are due Feb. 8. Officials do not anticipate holding oral interviews, but the state reserves the right to schedule such meetings, if need be.
The contract will last for one year and the state will have the option to renew the agreement for two additional terms of one year each.
The swap monitor will maintain a database on derivatives attached to New Jersey’s general obligation, appropriation, and state contract debt. It will file monthly reports that include the portfolio’s overall mark-to-market value as well as provide other services, according to the RFP.
The swap consultant will review New Jersey’s variable-rate and derivative risk and advise on how best to manage it, maintain an ongoing list of potential swap providers, and provide derivative termination and restructuring services.
Swap consultants will need to have experience advising issuers with derivative portfolios of at least $1 billion in notional value during the last three years, the RFP said.
New Jersey earlier this month reduced the total notional amount of its swap portfolio by $784.8 million to $3.3 billion. It terminated the swaps in a $1.11 billion school construction refinancing deal that switched variable-rate bonds into fixed-rate debt.
The refinancing priced on Jan. 14 originally was expected to total $1.9 billion, but officials cut the deal by $800 million due to unfavorable market conditions.
The state is looking to terminate more derivatives connected to school construction bonds. It may complete its school construction refinancing deal during the next three weeks. Refinancing additional school construction debt will help the state address letters of credit that will expire this year and reduce its swap portfolio.
