N.J. Unveils Web Site to Educate State's Residents on Bond Sales

To help generate additional interest on its upcoming $750 million New Jersey Transportation Trust Fund Authority bond deal Wednesday, officials yesterday unveiled a new Web site to educate residents on the state's bond offerings and will begin radio and newspaper advertisements promoting the sale.

Officials hope that the promotional campaign will bring more investor interest to the deal. Issuers' ability to access the current volatile municipal market to help finance essential capital projects was addressed yesterday during a financial conference at the Woodrow Wilson School of Public and International Affairs at Princeton University.

Nancy Feldman, New Jersey's director of public finance, addressed reporters after her presentation. Feldman said she expects the NJTTFA deal to find the needed investors, but the state has some flexibility in returning to the market at a later date, if need be.

"We're asking for $750 million," Feldman said. "I'm confident that we will have market access the question will be will we have $750 million? If we don't have $750 million, we'll come back again. We've got the authorization from the board to do as many tranches or series ... of bonds until we reach what is necessary and meets all the parameters of the statute."

To help pique interest and educate the public on the deal, the state yesterday released a new Web site, www.BuyNJBonds.gov to assist retail investors on how to purchase New Jersey bonds.

In addition, the state will begin radio advertisements this weekend and also place bond sale notices in local New Jersey papers. The last time the state pushed its borrowings to the residential public was in 2003 for an open space preservation bond deal and again that same year for tobacco bonds, according to Feldman.

The NJTTFA deal includes $250 million of capital appreciation bonds maturing 2023 through 2037 and $500 million of current interest rate bonds maturing 2023 through 2038. That $500 million piece includes a $100 million term bond maturing in 2028. Merrill Lynch & Co. will serve as bookrunner on the transaction. Citi and M.R. Beal & Co. are co-senior managers and McManimon & Scotland LLC is bond counsel. A.C. Advisory Inc. is the financial adviser.

Officials are also looking towards addressing three forward starting floating-to-fixed-rate swap agreements that will begin in 2009 and 2010 and are connected to New Jersey Economic Development Authority school facilities construction bonds, which are state contract bonds. The state has yet to decide whether to terminate the derivatives or sell variable-rate debt to help offset the swaps once they kick in.

"Right now I can't say how much things will cost us in the future," Feldman said. "We're still doing the analysis. We're working through it and to the extent that we have the ability to issue variable-rate bonds and that's a better choice than paying however many millions it might cost us to terminate a swap, than we will look at that cost benefit relationship and move forward from there."

Those three derivatives include a $250 million swap agreement with Royal Bank of Canada that will begin on May 1 with the NJEDA paying a fixed rate of 4.51% and receiving a 62% of one-month of the London Interbank Offered Rate plus 40 basis points.

The second swap for $250 million will kick in on Nov. 1 with the authority paying a fixed rate of 4.54% and receiving 62% of one-month Libor plus 40 basis points from the Bank of Montreal. The third and largest derivative for $500 million will begin in May 2010, with the NJEDA paying a fixed rate of 4.25% and receiving 62% of one-month Libor from Merrill Lynch Capital Services Inc., according to the state's latest preliminary official statement. That POS is the upcoming NJTTFA deal.

Selling variable-rate debt will also require liquidity enhancements and letters of credit, and obtaining those credit boosts can be a competitive process.

"We're working on it. It's a very difficult issue," Feldman said. Fitch Ratings and Standard & Poor's rate New Jersey AA-minus and AA, respectively. Moody's Investors Service rates the credit Aa3.

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