In an effort to cure defaults on the EnCap remediation project in New Jersey's Meadowlands, the Trump Organization is negotiating with Wachovia Bank NA and Deutsche Bank to allow the German bank to purchase nearly $314 million of bonds and state loans that Wachovia now holds.
Both banks declined to give specifics on the potential deal, including how much Deutsche is offering for the bonds. Trump last week submitted to the New Jersey attorney general's office a budget and financing proposal for the remediation project, indicating that Deutsche may buy the $210 million of bonds and another $104 million of Department of Environmental Protection debt from Wachovia.
Trump has until May 9 to finalize how the project will solve its defaults, yet the proposal asks for an additional 180 days, potentially pushing that deadline to Nov. 9. Michael Cohen, a Trump attorney and manager of the remediation project, said because of the tight credit market, the company needs more time to complete the financing process. The report pegs total remediation costs at $124.89 million.
"This is by far the worst market to go in and look for a financing - it's near impossible right now," Cohen said. "Only because of the power of the Trump mark and Mr. Trump's personal financials are we even in the running."
Cohen added that, with time, the needed capital will fall into place.
Wachovia, as the letter of credit provider on the bonds and head senior bank syndicate, now owns $210 million of New Jersey Environmental Infrastructure Trust and Bergen County Improvement Authority bonds after officials in September declared the borrower and developer of the Meadlowlands remediation project, EnCap Golf Holdings LLC, in default. The NJEIT and BCIA, as conduit issuers, sold the bonds on behalf of EnCap in 2005. In 2000, the New Jersey Meadowlands Commission entered an agreement with EnCap that gave the Texas-based company development rights on the land in return for remediation work on the 1,300-acre property. EnCap ownership has since changed and the company is now called Cherokee Investment PartnersII.
Eyeing a potentially lucrative real estate opportunity, Donald Trump last fall offered his assistance to the EnCap remediation project. In January, Trump, on behalf of Cherokee, took over management of the clean-up. In return, Cherokee will pay Trump $6 million annually for three years.
The bonds include the NJEIT's Series 2005 bonds for $107 million, subject to the alternative minimum tax. Banc of America Securities LLC priced the bonds. McCarter & English LLP was bond counsel and Public Financial Management Inc. was the financial adviser. Moody's Investors Service rates the bonds Aa2. Standard & Poor's and Fitch Ratings do not rate the debt.
The second piece includes the BCIA's Series 2005B bonds for $37.9 million, Series 2005C bonds for $26.7 million, and Series 2005D bonds for $38.2 million. The Series B and C bonds are subject to the AMT while the Series D bonds are taxable. Banc of America served as senior manager on the deal. Parker McCay was bond counsel and Municipal Advisory Partners Inc. was the financial adviser.
In addition to the NJEIT and BCIA borrowings, the Department of Environmental Protection granted EnCap a loan for $104.9 million.
Along with Deutsche potentially taking on the outstanding debt, Trump is requesting that once the defaults are paid, NJEIT will allow EnCap to tap into approximately $42 million of remaining bond proceeds and that the DEP will give the developer the remaining $40 million of its funds. New Jersey officials stopped allocating money to EnCap once it became clear that the company was not cleaning up the site in a timely and effective manner.
In the fall of 2006, Gov. Jon Corzine asked the state Inspector General Mary Jane Cooper to investigate the EnCap development after state officials rejected a $450 million bond proposal. That scrapped borrowing plan included two municipalities selling the debt on behalf of EnCap, with payment-in-lieu-of taxes securing the deal.
The Meadowlands lie in northeastern New Jersey. The original agreement between the NJMC and EnCap included hotel and retail development, residential housing, and a golf course.