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 this week.
The Depository Trust Co., the paying agent on the notes, did not receive payment on time Monday afternoon from the state's bond trustee. First Fidelity Bank, officials at both entities said.
As a result, bankers and dealers expecting payment did not receive their funds until Tuesday morning.
Officials familiar with the incident said they are still trying to sort out who is responsible and if and party to the transaction lost money because of the delay.
State Moves Funds
They said that the state of New Jersey moved funds between a variety of bank accounts, including accounts with New Jersey National Bank and the Federal Reserve Bank of New York, before depositing it with First Fidelity Bank, which was responsible for verifying the note payments.
First Fidelity then forwarded a $300 million payment of Depository Trust at 4 p.m. Monday, one hour after the clearing firm's deadline for processing note payments, said Donald F. Donahue, senior vice president of operations and administration at the firm.
Mr. Donahue said he invested the funds overnight and dispensed the money Tuesday morning. Any interest earned will be paid at the end of the month to the brokers and banks holding the notes, he added.
Losses could occur if interest Depository Trust earned by investing the money overnight was less than what noteholders could have earned by investing the funds themselves, said Robert Lurie, New Jersey's director of public finance.
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 Fed. He had no further comment.
A spokeswoman for Core-States Financial Corp., parent of New Jersey National Bank, said the bank transferred the money to First Fidelity about 3 p.m. She said the bank had no knowledge of any deadline for the transaction.
State officials said they did not know of the delay in payments until Wednesday, 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, 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, all due June 15, 1992.
Barton Crockett of the American Banker and Patrick M. Fitzgibbons of The Bond Buyer, a sister publication, contributed to this report.