The sale of bonds to finance a World Trade Center tower were delayed in part because of concerns by some Port Authority of New York and New Jersey investors that the issue may erode the value of their holdings.
A New York state agency last week pulled a $900 million offering of tax-exempt Liberty Bonds, securities meant to aid lower Manhattan’s recovery from the Sept. 11 attacks, citing “market considerations.” The bonds are necessary to finance the construction of 4 World Trade Center, a 1.8 million-square- foot (167,000-square-meter) skyscraper being built at the lower Manhattan site by Larry Silverstein.
The bondholders, who represent at least $1.2 billion of authority indebtedness, say their contracts preclude the agency from agreeing to make payments senior to their general obligation bonds, said Anne-Ellen Hornidge, an attorney for the group. If they go ahead, the group will “review all their options, including litigation,” she said in a phone interview.
“We think that it’s in violation of the contractual relationship that the Port Authority has with its existing bondholders, that they won’t issue senior debt,” Hornidge said.
Hornidge declined to name the bondholders. Fidelity Investments, the second-largest U.S. mutual fund company, is one of the investors, said Christopher Ward, executive director of the Port Authority. Vincent Loporchio, a spokesman for Boston- based Fidelity, declined to comment on whether it is a party. The Wall Street Journal reported the dispute earlier today.
Group May Grow
The group of concerned investors may grow larger, said Hornidge, an attorney with Boston-based Mintz Levin Cohn Ferris Glovsky & Popeo PC.
“That $1.2 billion probably understates the number of investors who’ve contacted us,” she said.
Fidelity, New York-based BlackRock Inc. (BLK) and Boston-based Eaton Vance Inc. are among holders of bonds issued by the Port Authority, Bloomberg data show. Jessica Greaney, a BlackRock spokeswoman, and Robyn Tice, a spokeswoman for Eaton Vance, declined to comment.
The delay of the sale was “due to market considerations, including the volatile rate environment,” as well as “questions from investors about the deal structure,” the authority and Silverstein said in a joint statement today.
The Port Authority has “strong support” from bond rating firms and attorneys inside and outside the agency, Ward said. “If we’re not able to convince them, it will become an issue of how we can maintain as much of the original structure of the deal and still make them happy,” he said of the investors.
Last week’s postponement was the second in less than six months for the bond issue. Silverstein said in an April 5 interview that he was optimistic about the bond sale.
“I think we’ll end up very pleased with the net results,” Silverstein said. “We’re going to be happy with it. My suspicion is that we would not have postpone it again.’
The authority ‘‘absolutely” believes the bond structure is legal, John Kelly, spokesman for the agency, said in an e-mail.
“We have the time to get this right,” Kelly said. “Our current aim is to allow the bond market to settle down and better educate investors on the deal structure so we can get the best rate possible.”
Completion of 4 World Trade Center remains on target for 2013, Kelly said. It is one of two skyscrapers under construction at the site. The other is 1 World Trade Center, a 104-story building formerly known as the Freedom Tower, which the authority is building itself.
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