Issuing Officials Authorize List of Potential Bonds for Defeasance

General Obligation bonds identified that fit criteria to be paid off early for State savings

(TRENTON) – Pursuant to the New Jersey Debt Defeasance and Prevention Act, the Department of the Treasury announced that issuing officials met today and authorized the State to defease certain General Obligation (GO) bonds to reduce the State’s debt reliance and to save on future interest payments.

During a public meeting via teleconference, the issuing officials – the State Treasurer and the Acting Director of the Office of Management and Budget – approved a resolution outlining the list of possible GO bonds to be defeased. The list identifies those series of GO bonds that have a callable date in the near future and, if defeased, will provide the State the greatest savings within the 10-year period outlined in legislation.

The bond series listed as potential candidates for defeasance were compiled and vetted by the Office of Public Finance following the approval of the New Jersey Debt Defeasance and Prevention Act on June 29, 2021.

Through the defeasance process, the Office of Public Finance will purchase U.S. Treasury securities using money appropriated to the New Jersey Debt Defeasance and Prevention Fund for the selected GO bonds. The U.S. Treasury securities will be placed into an irrevocable escrow account at a trustee bank, and at the maturity of the called GO bond, a portion of the U.S. Treasury securities plus interest earned will pay off the GO bond in full. Any GO bonds defeased through this process will be removed from the State’s balance sheet at the time the U.S. Treasury securities are placed into escrow.

The exact selection of which GO bonds from the approved list will be defeased will be made based on market factors at the time of the purchases of the U.S. Treasury securities. This meeting is the first formal action in a process that is expected to take until the end of calendar year 2021 to complete.

In addition to the General Obligation bonds, the New Jersey Economic Development Authority and the New Jersey Building Authority will meet in the coming weeks to authorize additional bond series to be defeased through the Debt Defeasance and Prevention Fund.