New Jersey officials plan to price $1.6 billion of notes today, three months after the embarrassment of missing by one day a $300 million payment on a 1991 note deal.
Market sources agreed the sale is unlikely to suffer as a result of the June mishap, because it is widely considered to have been a quickly corrected technical glitch rather than a reflection on the state's commitment to paying bills on time.
Still, New Jersey's black eye from the affair has lingered because little explanation has been offered so far.
"It looked extremely sloppy," one portfolio manager of a New Jersey, tax-exempt fund said last month. He added yesterday that the missed payment is probably not a legitimate reason to reject the new notes, but could be used "as an excuse not to participate" by investors worried about other problems with the credit, including deteriorating employment statistics.
State officials in the attorney general's office, the treasurer's office, and the Division of Public Finance say they have been studying what went wrong with the note payment. But no findings have been made public to date.
A spokesman for the attorney general's office said officials there are planning to give the treasurer a summary of their findings, but it would be up to the treasurer to release it to the public. The underwriters on today's deal, Kidder, Peabody & Co. and First Fidelity Securities Group, declined to discuss the note issue, deferring to state officials.
In a statement released late yesterday, state Treasurer Samuel Crane said the wire transfer process that moves money from the state to note holders is being reviewed "in an effort to identify changes that are within the control of the state which might serve to expedite" the procedure.
"Such changes will include steps to reduce the number of banks involved with the process and the institution of procedures to provide for the direct transfer of funds from the state cash management fund to the paying agent," Mr. Crane said.
David Murphy. a portfolio manager at Fidelity Investments, said the payment trouble "doesn't look like it will be a big problem" for today's sale.
"The impression is it was a glitch with somebody in the back office that was corrected immediately," Mr. Murphy said.
Rating agency officials agreed the missed payment problem is not a credit concern.
Claire G. Cohen, an executive managing director at Fitch Investors Service, said recently that the agency's role is to ensure that the appropriate safeguards are in place at the start of a deal, not to maintain a constant watch over payment-related transactions.
"It was some sort of administration glitch." Ms. Cohen said.
"Clearly it shouldn't happen, but I wouldn't put that into the untimely payment' category. If the appropriate management is in place, we can't hold their hand through the process."
The Depository Trust Co. said at the time of the missed payment that it did not receive the required $300 million until after 4 p.m. on June 15, more than an hour after the deadline for receiving and allocating funds that day.
First Fidelity Bank, the paying agent for the June notes. was responsible for making the payment to Depository Trust. State officials say they wired the money to the appropriate parties shortly after noon. But First Fidelity officials said they received the money late as well. United Jersey Bank is the paying agent on today's deal.
Ms. Cohen said she thinks investors are confident in New Jersey's commitment to making payments on time. But she said New Jersey would benefit from telling investors, "Here's what went wrong, and here's why it won't happen again. "
One New Jersey official said yesterday the state is considering making its payments to the trustee on the note deal a day in advance of the due date to make doubly sure there is no repeat of the missed note payment. But it was unclear whether that policy would be formalized in the bond documents.
Market sources say initial price talk on the notes was in the 3.10% to 3.12% range, based on secondary market trading ranges for a recent Pennsylvania note deal.
Several municipal traders yesterday noted that the issue, if sold at 3.10% to 3.12%, would be cheaper than taxable one-year Treasury notes, which late yesterday yielded 8.08%.
Standard & Poor's Corp. said yesterday it would issue a rating statement on the notes today. The previous deal earned the agency's highest rating, SP1-plus on the fixed portion and SP1-plus/A1-plus on the floating piece.
Fitch assigned its highest ratings to today's deal, an F1-plus for the $1 billion fixed portion and an F1-plus/F1-plus on the $600 million floating notes.
Moody's Investors Service was still preparing its rating statement late yesterday.