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Public Finance Marketplace During the Turbulent Economic Times of 2009

Article

Corporate & Finance Alert

September 8, 2009

During the turbulent economic times of 2009, the public finance marketplace has been quite active and has been able to get projects financed and/or refinanced. In fact, due to the economic conditions, interest rates on municipal debt have been at low levels, which has lowered debt service costs for borrowers utilizing tax-exempt debt. Set forth below is a sampling of transactions Gibbons P.C. has closed in the public finance marketplace
in 2009.

We served as bond counsel to the New Jersey Educational Facilities Authority (the “NJEFA”) on its issuance of $258,075,000 Revenue Refunding Bonds, University of Medicine and Dentistry of New Jersey Issue, Series 2009B, dated April 15, 2009. The University of Medicine and Dentistry of New Jersey (the “University”), headquartered in Newark, New Jersey is the University of the health sciences of the State of New Jersey, with programs at four main academic health center campuses in Newark, Camden, New Brunswick/Piscataway and Stratford, New Jersey, and also at educational and health care institutions in communities throughout the State. The proceeds of the Bonds were loaned to the University and used to refund all of several outstanding bond issues of the University. As security for the Bonds, the NJEFA and the University entered into a loan agreement in which the University agreed to make loan payments to the NJEFA sufficient to pay principal and interest on the Bonds when due, to replenish a bond reserve fund and to pay all issuance costs incurred by the NJEFA in connection with the refunding. In addition, the University’s obligations under the loan agreement were secured by lockbox funds established pursuant to a lockbox agreement among the University, U.S. Bank National Association and the NJEFA. The Bonds were rated BBB+ by Fitch Ratings and Baa2 by Moody’s Investor Services, Inc.

We served as bond counsel to the Somerset County Improvement Authority (the “SCIA”) in structuring a lease program in an aggregate principal amount of not to exceed $10,000,000 of lease purchase obligations, dated June 30, 2009, whereby various municipalities, school districts and an educational services commission within the County of Somerset, New Jersey (each a “Participant”) may submit a request to the SCIA to borrow funds from the SCIA (the “Somerset County Lease Banc Program”) to finance the lease purchase of certain capital equipment and, if applicable, other personal or real property (the “Project”). Under the Somerset County Lease Banc Program, the SCIA enters into a master lease purchase agreement with TD Equipment Finance, Inc., as the lessor (the “Lessor”), where the Lessor intends to provide funds to acquire the Project over time, and immediately lease the Project to the SCIA (the “Authority Lease”). Under the Authority Lease, the SCIA must make rental payments solely from amounts received by the SCIA from a Participant under the participant lease. The SCIA will sublease the project to a Participant pursuant to the terms of a Sublease Purchase Agreement to be entered into between the SCIA, as sublessor and a Participant, as sublessee (the “Participant Lease”). Under the Participant Lease, a Participant will make rental payments that must either be subject to annual appropriation or subject to a general obligation of the Participant in an amount sufficient to pay the corresponding rental payments applicable to the equipment, plus all administrative expenses of the Somerset County Lease Banc Program. As additional security, the County of Somerset, New Jersey entered into a guaranty agreement with the Authority to guaranty the punctual payment of moneys by the SCIA to the Lessor to the extent the lease payments made by the SCIA to the Lessor are not sufficient. Numerous Participants have closed on various capital financings in 2009.

We also served as bond counsel to The Bergen County Improvement Authority (the “BCIA”) on its issuance of $26,944,000 County of Bergen Guaranteed Loan Revenue Bonds, Series 2009A, dated June 30, 2009. The Bonds were issued to provide funds to make loans to the Borough of Fairview, the Borough of Little Ferry, the Borough of Upper Saddle River, the Village of Ridgefield Park, the Borough of Edgewater, the Haworth Board of Education and the Borough of Rutherford, all located in the County of Bergen, New Jersey (the “Borrowers”), to refund certain outstanding bonds of the Boroughs of Fairview, Little Ferry, Edgewater and Upper Saddle River, the Village of Ridgefield Park and the Haworth Board of Education as well as finance certain new capital projects in the Boroughs of Edgewater and Rutherford. The Bonds are secured by those revenues of the BCIA derived by the BCIA from loan repayments made by the Borrowers. Payment of principal and interest on the Bonds is further secured by an unconditional and irrevocable guaranty of the County of Bergen, New Jersey. The Bonds were rated Aaa by Moody’s Investor Services, Inc.

Finally, we served as bond counsel to The Essex County Utilities Authority (the “ECUA”) on its issuance of $52,240,000 Solid Waste System Refunding Revenue Bonds, Series 2009 (Secured by a County Deficiency Agreement with the County of Essex), dated May 21, 2009. The proceeds of the Bonds were used to provide funds to refund a portion of the ECUA’s Solid Waste System Revenue Bonds, Tax-Exempt Series 1999A originally issued in the aggregate principal amount of $67,573,674, dated March 30, 1999. Payment of principal and interest on the Bonds is secured by a deficiency agreement whereby the County of Essex, New Jersey unconditionally agrees to pay principal and interest on the Bonds when due to the extent the ECUA is deficient of funds to do so on its own. Furthermore, payment of principal and interest on the Bonds is insured by a financial guaranty insurance policy issued by Assured Guaranty Corp. The Bonds were rated Aa2 by Moody’s Investor Services, Inc. based upon the issuance of the insurance policy.