The New Jersey Transportation Trust Fund Authority yesterday approved the conversion of $345 million of Series 2003 B1-B5 auction-rate securities into variable-rate mode in order to gain lower interest rates on the bonds.

Goldman Sachs & Co., which priced the 2003 bonds, will serve as manager on the upcoming restructuring as well. The deal could price within the next few weeks and would allow the authority to lower interest costs by exiting the auction-rate market, which began to demonstrate pronounced volatility in February.

"The interest was costing us $200,000 more a week than it was before and obviously the [TTFA] is already under enormous fiscal pressure," said Kris Kolluri, New Jersey's Transportation Commissioner. "This kind of acute pressure is not something we believe the [TTFA] should be saddled with."

Of the auction-rate debt, the 35-day Series B1 bonds and the seven-day B2 bonds, for $85 million each, currently carry interest rates of 5.48% and 5.39%, respectively, as of April 4 and May 5. Interest on the B1s reached as high as 6.2% on Feb. 29 while the B2 bonds reset at 6.24% on Feb. 25, its highest rate. XL Capital Assurance Inc. insures both series.

The Series B3 bonds for $50 million reset daily and are also insured by XL. Series B4 and B5 bonds, each for $62.5 million, are insured by Financial Security Assurance Inc. and reset every week. The B4 bonds currently carry a rate of 4.01% as of May 7 and the B5 bonds last reset at 4.04% on May 5. In late February the bonds hit their highest rates to date, with B4 at 4.68% on the 27th and B5 at 4.68% on the 25th.


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