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NEW JERSEY GENERAL OBLIGATION DEBT LOWERED TO 'AA+' BY FITCH -- FITCH FINANCIAL WIRE --

 NEW YORK, Dec. 16 /PRNewswire/ -- The State of New Jersey's general obligation bond rating is lowered to 'AA+' from 'AAA' by Fitch. The action, applying to $3.3 billion in outstanding GO debt as well as new bonds, is taken after a review in connection with the sale of $1.6 billion Refunding Bonds Series D. The new bonds will be due on Feb. 15, 1996-2013, with call provisions yet to be set. The refunding involves both an interest savings component and debt restructuring, with debt service requirements sharply lowered in 1993-95, but higher in the remainder of the 20 year amortization period.
 New Jersey's financial situation has been complicated in the past few years. An ambitious agenda of higher taxes to meet educational mandates as well as rising costs coincided with adverse effects from the recession and, later, tax revolt resulting in a lowered sales tax rate. A series of nonrecurring measures has averted deficits but balance now is slim and there is a likely gap in the 1993-94 budget which must be filled.
 The current refinancing will free up about $900 million over three years, of which about 60 percent is expected to be used for capital purposes, with the remainder devoted to surplus, selectively available in the future, and reserves. While the action gives budget relief in the near term, requirements for debt will be higher in later years, increasing future debt burden.
 New Jersey chose tax relief in the midst of recession-induced financial strain. It is now choosing to defer debt service in the immediate future to provide for unmet capital needs, while increasing requirements in future years when additional resources may or may not be available. This juxtaposition in a still uncertain economic climate is inconsistent with the highest credit standing, even though the state is the second wealthiest in the nation and a stronger financial position is likely with recovery.
 -0- 12/16/92
 /CONTACT: Claire G. Cohen of Fitch, 212-908-0552/


CO: ST: New Jersey IN: SU: RTG

WB -- NY068 -- 7757 12/16/92 13:23 EST
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Publication:PR Newswire
Date:Dec 16, 1992
Words:343
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