New Jersey officials are working on issuing smaller tranches of New Jersey Transportation Trust Fund Authority debt than in previous years to better match current market conditions.

Officials yesterday approved up to $1.6 billion of debt to help support road, bridge, and mass transit capital projects throughout the state. The NJTTFA typically sells $1.2 billion or more of new-money bonds each year in one fall transaction. However, current disruptions in the municipal market now require state officials to chop the approved borrowing into smaller tranches to achieve better rates.

Merrill Lynch & Co. will price roughly $500 million of NJTTFA bonds the week of Nov. 10. Citi and M.R. Beal & Co. will serve as co-senior managers on the transaction. Bond counsel is McManimon & Scotland LLC.

The state may increase the deal's size if market conditions prove to be favorable and the deal will include capital appreciation bonds, according to New Jersey Transportation Commissioner Kris Kolluri.

"Our sense is that the credit markets are reopening, but our financial team has advised us that we will probably do the issuance in tranches in increments of $500 million in the first instance and see how that goes," Kolluri said. "And ultimately our objective is to issue enough bonds to make sure we have cash to pay for the projects over the next 12 months."

NJTTFA debt is backed by gas, petroleum, and general sales tax revenues, among other funding streams. The state also allocates $895 million of funds to the authority each year through fiscal 2011. Bond proceeds help finance Department of Transportation infrastructure upgrades and capital projects for the New Jersey Transit Authority. Roughly 60% of the proceeds support roadway projects while mass-transit projects receive 40% of the bond proceeds.

Last year, the authority sold $1.17 billion of Series 2007A bonds on Sept. 19 with UBS Securities LLC as the book-runner. Financial Security Assurance Inc. and Ambac Assurance Corp. insured all of the bonds.

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