New Jersey bridge developer to borrow $457 million in muni market


By Hilary Russ

Nov 4 (Reuters) - New Jersey's economic development arm onTuesday will sell $457 million of municipal bonds on behalf ofthe private developer designing and re-building an 85-year-oldbridge between New York and New Jersey.

The bonds will help finance a $1.5 billion replacement forthe Goethals Bridge, which links New Jersey to Staten Island andis being built under a public-private partnership by the PortAuthority of New York and New Jersey. The project will also geta $480 million low-interest federal loan.

The tax-exempt, private-activity bonds are barely clingingto investment grade, with Fitch Ratings saying it expects torate the bonds BBB-minus once they price on Tuesday.

The sale comes as retail investors have fled muni bond fundssince late May as factors such as Puerto Rico's financialtroubles, the prospect of higher interest rates and Detroit'sbankruptcy filing raise anxiety levels across the muni market.

Institutional investors and mutual funds are the likelybuyers of the Goethals Bridge bonds, said Dan Heckman, seniorfixed-income strategist at U.S. Bank Wealth Management.

High-yield mutual funds in particular are likely buyers,said Adam Buchanan at Ziegler Capital Markets in Chicago. Hisfirm may be a buyer, depending on the rates, he said.

The New Jersey Economic Development Authority (NJEDA) isacting only as a conduit issuer for the developer, but itcharges fees for handling such deals. The NJEDA did not reply toa request for information about how much it would make in feesin this case.

The private developer, NYNJ Link, a unit of Australia'sMacquarie Infrastructure and Real Assets, isresponsible for making debt service payments.

The bonds are insured by Assured Guarantee, but are notbacked the taxing power of New York, New Jersey or the PortAuthority, according to the preliminary official statement.

Bank of America Merrill Lynch is the lead underwriter.

While such a low rating is rare for most traditionalmunicipal bond issuers, muni investors are becoming morefamiliar with project financings, which are usually rated justabove junk because of the risk that construction won't becompleted on time and because they often cover a single asset,said Fitch analyst Scott Zuchorski.

"Most, if not all of the pure project financings, are goingto be in that triple-B level," he said. More establishedinfrastructure projects, like larger toll roads or airports,tend to be rated A or better, he said.

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