A late wire transfer delayed by one day the payment of $300 million of interest and principal on New Jersey one-year notes to bankers and broker dealers, state officials and market professionals said yesterday.
The Depository Trust Co., the paying agent on the notes, did not receive payment on time from the state's bond trustee, First Fidelity Bank, officials with both entities said yesterday.
As a result, bankers and dealers expecting payment Monday afternoon did not receive their funds until Tuesday morning, officials said.
Depository Trust did not receive the $300 million until Moday afternoon after 4:00 EDT and more than an hour after the daily deadline Depository Trust sets for receiving and allocating funds, Donald F. Donahue, senior vice president in charge of operations and administration, said yesterday.
He said he took the funds and invested the money overnight and dispensed the money Tuesday morning. Any interest earned on the funds will be paid at the end of the month to the brokers and banks holding the notes, he added.
Rick Barnes, an assistant vice president with First Fidelity's corporate trust department, said his bank received the $300 million wire transfer late from New Jersey National Bank, which had received the money from the New York Federal Reserve Bank. He had no further comment.
Officials from New Jersey National Bank could not be reached for comment.
State officials said yesterday they did not know of the delay in payments until yesterday, when they received telephone calls from securities professionals and reporters. It could not be determined if the state was in technical default on the notes because of the wire delay, state officials said yesterday, but they said they have begun an investigation.
The $300 million of notes were part of a $1.8 billion series of tax and revenue anticipation notes sold between July 1991 and December 1991, and all due June 15, 1992. The $300 million of variable-rate notes were part of a $600 million offering sold in August and December, the series B. C, D, and E, underwritten by Lehman Brothers and Citicorp Securities Markets Inc.
Frank Murphy, manager of the short-term products at Lehman Brothers, said he became aware of the problem Tuesday afternoon.
"We started getting some phone calls on this at around 3:00 p.m. EDT," Mr. Murphy said. "There were a couple of accounts that were actively looking around for where the money had gone. It seems that all of the people eventually were paid, just later than they expected."
Officials at Citicorp Securities Markets Inc. could not be reached for comment.
Robert Lurie, director of public finance for New Jersey, said, "All I can tell you at this point is that we are concerned about it and we are still gathering the facts." Mr. Lurie oversees the issuance of the state's bonds and notes.
Larry Singer, manager of the state's portfolio in the state's division of investment, said, "We wired that money out [on Monday]. We have a 12:28 p.m. EDT Federal Reserve Bank confirmation. That is as far as my responsibilities go."
"We take it very seriously, and we are going to look and see why the deadline was missed," Mr. Singer said. "We do not feel it was missed at this point for any particular financial reason. We feel it was a tchnical issue, but we are investigating."
John T. Kelly, partner at the Parsippany, N.J., office of the New York bond counsel firm of Mudge Rose Guthrie Alexander & Ferdon, which served as bond counsel during the structuring phase of the deal, said he was unaware of the situation and had no comment late yesterday afternoon.
A bond dealer involved in the original underwriting of the deal said, "I don't think it affects us. It definitely makes people wonder about the next deal."
"It hurts the state unless the state can clearly demonstrate a change somehow," he said.
Mr. Donahue said delay of payments on bonds and notes does happen. "It certainly happens," he noted. "It is not common, but it happens."
Patrick M. Fitzgibbons contributed to this article.