World Trade Center Investors Seek Higher Yields on 40-Year Debt
Developer Larry Silverstein may have to raise yields on the longest maturities of $1.25 billion of tax-exempt bonds being priced today to help finance the construction of 4 World Trade Center, an investor said.
Goldman Sachs Group Inc. (GS), which is managing the sale, is marketing about $700 million of bonds maturing in 2051 with a 5.75 percent coupon at a yield of 5.15 percent, said Kathy Bramlage, a director at HighTower Advisors’ Treasury Partners Unit, which manages $7 billion.
The yield on the 40-year bonds may have to rise as high as 5.25 percent and the structure may have to shift from premium to par bonds to attract more buyers, she said.
“That’s just a very, very long maturity for typical muni buyers, but we have a great market today and that’s obviously going to help the deal,” she said in an interview from New York. She said she spoke to Goldman about the deal.
Yields on 30-year Treasuries dropped 16 basis points, or 0.16 percentage point, to 2.97 percent at 11:43 a.m. New York time, according to Bloomberg Bond Trader prices, touching a three-week low. Investors sought safer securities on renewed concern that the European rescue plan will unravel.
On top-rated 30-year muni bonds, yields fell 7 basis points to 3.59 percent, according to Bloomberg Valuation index data.
The bond issue for 4 World Trade Center, which will become the headquarters of the Port Authority of New York and New Jersey, was delayed almost a year because of market turmoil and disputes with bondholders. The building will reach 64 stories, according to the preliminary official statement.
The debt, secured by payments from the Port Authority and New York City, is the first time the transportation agency and the city have combined to back bonds, said Marvin Markus, the Goldman Sachs investment banker who structured the sale. New York City is leasing 15 floors in the tower.
In contrast to the 2051 maturity, investors are showing “a ton of interest” in 5 percent coupon World Trade bonds maturing in 2031 that are being priced at par, Bramlage said. Goldman may shift some of the bonds maturing in 2051 to 2044, she said.
The debt is being issued through the New York Liberty Development Corp., created to sell tax-exempt debt as part of the Liberty Bond Program, part of a federal economic package to help New York City recover from the Sept. 11 terrorist attacks.
Michael DuVally, a Goldman spokesman in New York, and Bud Perrone, a spokesman for Silverstein, didn’t immediately respond to e-mails seeking comment.
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