The New Jersey Economic Development Authority Wednesday will issue $750 million of taxable school construction Build America Bonds, in what could be the BAB market’s largest floating-rate note sale.

The deal will be structured as $750 million of taxable BAB notes with yields based on the three-month London Interbank Offered Rate plus a spread. The current three-month Libor rate is 0.37%.

The state appropriation-backed securities will mature in 2013 and New Jersey plans to refinance the notes into long-term debt or roll them over with additional notes at maturity, according to a Moody’s Investors Service report.

Bank of America Merrill Lynch is the book-runner. McCarter & English LLP is bond counsel.

Moody’s rates the sale Aa3. Fitch Ratings and Standard & Poor’s rate the transaction AA-minus.

While the tax-exempt muni market is accustomed to floating-rate bonds, taxable BAB securities based off of the Libor or SIFMA index are less common.

Last year, Louisiana sold $285 million of taxable, Libor-based second-lien gasoline and fuel tax revenue BABs in three separate deals with Merrill Lynch, Morgan Keegan & Co., and Citi serving as underwriters. The bonds are rated AA and Aa1 by Standard & Poor’s and Moody’s.

Sizeable buyers of those bonds include Pimco Advisors, Lexington Insurance Co., and Commerce Insurance Co., as of Dec. 31, and USAA Investment Management Co., as of Jan. 31. More recent investors include Principal Management Co. and Massachusetts Financial Service, as of March 31, and Wells Fargo Bank, as of Feb. 28, according to Bloomberg LP.

Tom Kozlik, municipal credit analyst at Janney Capital Markets, said buyers of taxable debt might capture higher returns in the future on the NJEDA’s floating-rate BAB deal, if interest rates rise.

“I think investors on the institutional and retail side are looking at this as a way to protect them from inflation going ­forward in the short term because as Libor or SIFMA goes up, their payments are going to go up according to that variable-rate index, plus whatever that spread is,” Kozlik said.

New Jersey Treasury Department spokesman Andrew Pratt said the state anticipates saving 70 basis points by issuing Libor-based BAB notes rather than selling tax-exempt, variable-rate debt.

The floating-rate notes will align with three derivatives to which the state was committed in complicated pairings. In a $500 million swap with Merrill Lynch Capital Services Inc., the state pays a fixed rate of 4.25% and receives 62% of one-month Libor, currently 0.30%, plus 40 basis points, the preliminary official statement said.

Pratt said those payment terms may change. The derivative ends in 2035.

In a second $250 million swap, the state pays Royal Bank of Canada a fixed rate of 4.51% through Nov. 1, 2012, and receives 62% of one-month Libor plus 40 basis points. That contract ends in 2034.

In a third fixed-to-floating swap for $250 million, the state pays Deutsche Bank AG 62% of one-month Libor plus 40 basis points and receives a fixed rate of 1.11%. That agreement ends May 1, 2011.

Bond proceeds will finance school construction and repay a $250 million school construction note for the NJEDA set to expire June 18.

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