MOODY'S RATES NEW JERSEY ECONOMIC RECOVERY FUND BONDS 'A1'
MOODY'S RATES NEW JERSEY ECONOMIC RECOVERY FUND BONDS 'A1' NEW YORK, Sept. 21 /PRNewswire/ -- Moody's Investors Service today assigned a rating of 'A1' to the New Jersey Economic Development Authority's offering of $227 million economic recovery fund bonds (state contract), which is expected to be sold this week. The issue is expected to consist of $175 million 1992 Series A bonds and $52 million 1992 Series B (taxable) bonds. Security for these bonds rests primarily with payments by the State of New Jersey under a contract between the Economic Development Authority and the State Treasurer. The state contract payments, which are to be made from the General Fund, are subject to legislative appropriation. In an unusual feature, some of the bonds now offered are to pay interest at a variable rate (until Sept. 15, 1997, or earlier conversion to a fixed rate) while state contract payments, if appropriated, are for fixed amounts. The circumstances under which the variable rate bonds may convert early to a fixed rate, retroactive to the previous interest payment date, are specified in the bond documents. The rating assigned reflects our opinion that the bonds will be paid in accordance with the prevailing requirement, whether fixed or variable. To assure the adequacy of funds available for variable rate debt service, also pledged to the variable rate bonds are payments to be received under interest rate swap agreements and interest rate cap agreements between the authority and a qualified swap provider, defined as an entity rated in one of the two highest rating categories by Moody's. A swap agreement may be replaced by another, if the replacement is on "substantially identical terms" and is provided by a qualified swap provider. In the event of a swap default or early termination of a swap agreement with no replacement, settlement payments may be due the swap provider, and the authority has no obligation to obtain an appropriation for such payments. Settlement payments would rank on a parity with debt service due to holders of the related variable rate bonds, and could thus jeopardize these debt service payments. The circumstances under which settlement payments would be required are few, relating primarily to payment default by the authority or other circumstances which require acceleration of the bonds, and the rating assigned reflects our opinion that they are unlikely. Bond proceeds will be used to fund the New Jersey Economic Recovery Fund and provide financing for economic development projects as authorized by law. Factors contributing to this rating include the underlying credit position of the State of New Jersey, the adequacy of the arrangements provided for payment of the variable rate bonds, the limited nature of the state's payment obligation, and the use of bond proceeds for purposes that are not a traditional state function. New Jersey's broad-based economy, high wealth levels, and moderate debt ratios form the basis of its credit strength. But a developing pattern of reliance on non-recurring measures to achieve budgetary balance, four years of financial operations marked by revenue shortfalls and operating deficits, and the likelihood that serious financial pressures will persist have detracted from bondholder security. In recognition of these circumstances, Moody's recently lowered the State of New Jersey's obligation bond rating from 'Aaa' to 'Aa1'. -0- 9/21/92 /CONTACT: George Leung, managing director, of state ratings, 212-553-0342, or Steve Hochman, vice president/assistant director, state ratings, 212-553-0338, both of Moody's/ CO: New Jersey Economic Development Authority ST: New Jersey IN: SU: RTG
TM-LD -- NY100 -- 1926 09/21/92 18:40 EDT
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|Date:||Sep 21, 1992|
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