N.J. Turnpike Seeks Global Buyers for $1.5 Billion Bond Offer

The New Jersey Turnpike Authority is attempting its first global debt-marketing campaign for its $1.5 billion Build America Bond sale on Dec. 6, as it hopes to attract international buyers for the U.S.-subsidized securities.

Preliminary offering documents for the taxable bonds have 14 pages of special instructions for potential investors in 21 countries, including France, China and Australia. None of those foreign disclosures were included in the authority’s only other issuance of Build America Bonds, in April 2009.

The authority is issuing the debt to help fund a $7 billion capital-improvement program that includes widening portions of the 122-mile (196-kilometer) New Jersey Turnpike and 173-mile Garden State Parkway in the most densely populated U.S. state. It joins borrowers including Illinois and New York City that have courted non-U.S. buyers for Build America Bonds, which were created last year as part of President Barack Obama’s economic-stimulus program to finance public-works projects.

“They have seen increasing appetite for these bonds from foreign investors because they are taxable,” William Quinn, a spokesman for the state Treasury Department, said in a telephone interview today. “It’s more sort of response to the interest they are getting; it’s not so much a marketing campaign to drum up new buyers.”

Nobody from New Jersey’s treasury department will travel overseas to meet with potential investors, though state officials will participate in conference calls, said Tom Feeney, a spokesman for the Turnpike Authority.

$170 Billion

Citigroup Inc., co-senior manager of the deal, is leading the overseas marketing, according to Feeney. Alexander Samuelson, a spokesman for Citigroup in New York, didn’t immediately have a comment when reached by telephone today.

States and local governments save money issuing Build America Bonds because the federal government rebates 35 percent of the interest costs to the borrower, reducing the net cost. Almost $170 billion of the bonds have been sold since the first issue in April 2009, according to data compiled by Bloomberg.

Because they are taxable, the yields on Build America Bonds are higher than traditional tax-free municipal bonds, making them more appealing to foreign buyers who don’t benefit from tax exemption in the U.S.

International holdings of U.S. municipal debt rose to $83 billion at the end of June, from $50 billion in the first quarter of 2009, according to Federal Reserve data.

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