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New Jersey Sells $350 Million of Bonds to Bank of America

May 1 (Bloomberg) -- New Jersey sold $350 million of new-money general-obligation debt with Bank of America Merrill Lynch the winning bidder and 10-year debt priced to yield 1.89 percent, data compiled by Bloomberg show.

New Jersey, the 11th most-populous state, received eight bids. The borrowing sold at a premium, with Bank of America paying the state $399 million to buy the debt and New Jersey obligated to repay $350 million, according to the Treasury Department.

“It’s a nice vote of confidence for New Jersey as a strong credit with a long history of responsible management,” Treasurer Andrew Sidamon-Eristoff said in an interview in Trenton.

Yields on the 10-year debt were 0.15 percentage point above an index of benchmark municipals, Bloomberg data show. That’s less than half the 0.34 percentage point yield penalty the state incurred when it priced 10-year debt in December 2009, its last new-money general-obligation sale, according to Bloomberg data.

Bank of America submitted the winning bid with a true interest cost of 2.737 percent. True interest cost is an underwriter’s bid that represents the total cash amount of interest payments and the timing of interest and principal payments.

Eight Bids

The other bidders -- Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Barclays Capital Inc., Wells Fargo & Co. and National Association, Goldman Sachs Group Inc., Morgan Stanley & Co. and RBC Capital Markets -- offered 2.739 percent to 2.816 percent, and total payments of $403 million to $408 million.

New Jersey, which has the third-highest per-capita income among U.S. states, last refinanced general-obligation debt in September 2010, with 10-year yields 0.61 percentage point above top-rated municipals.

New Jersey had the second-highest tax burden among U.S. states in 2010, following New York, according to the Tax Foundation, a Washington-based research group that advocates a simpler tax code.

The borrowing comes six months after Hurricane Sandy hit New Jersey’s coast on Oct. 29, damaging seaside resort towns and railroads.

Proceeds from today’s sale will finance capital projects, according to bond documents. Standard & Poor’s rates New Jersey AA-, three steps below benchmark municipals, with a negative outlook. Moody’s Investors Service and Fitch Ratings assign comparable grades, with a stable outlook.

To contact the reporter on this story: Terrence Dopp in Trenton at tdopp@bloomberg.net; Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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