The United Nations Development Corp. is preparing to refund and retire all its outstanding debt as part of a transaction that includes the sale of the United Nations Plaza Hotel.

Established by the New York State legislature in 1968, the development corporation provides offices and lodging for UN officials. The corporation leases three buildings from New York City, including rooms that makes up the UN Plaza Hotel.

The sale of the hotel is scheduled to take place as part of a comprehensive financing arrangement, in which the development corporation must refund its outstanding bonds and retire all bonds associated with the hotel. The property can then be sold to private investors and produce much-needed revenues for New York City's fiscal 1995 budget.

The administration of Mayor Rudolph Giuliani claims that the sale of the hotel to private investors can produce $65 million in fiscal 1995 revenues. The city is facing a potential budget gap of $1 billion in fiscal 1995, which began July 1.

Last week, the city's Economic Development Corp. choose J.P. Morgan Securities to advise the city on the sale of the hotel. City officials are considering a number of proposals to make private city-owned property.

Thomas Appleby, president of the UN Development Corporation, said the refunding issue will take place during fiscal 1995, but a more precise issuance date is not available.

Appleby said the complex deal will include a $140 million advanced refunding issue, needed to satisfy bond covenants following the sale of the hotel. The refunding is needed because the agency will no longer have hotel revenues to support its debt. Therefore the corporation must replace its old debt with new bonds that are legally structured with revenues that exclude hotel charges.

The financing package must also include a $28 million defeasance, or retirement, of all bonds solely associated with the Plaza Hotel, and not the other properties leased by the UN corporation. The hotel sale, which will finance the defeasance, must net the city about $93 million in order to produce $65 million in fiscal 1995 revenues.

Wall Street sources say the UN corporation probably will call on Goldman, Sachs & Co. to underwrite the negotiated issue, as it has done on its other issues. The development agency last sold bonds in late 1992, using Goldman as its underwriter. "We have been working with Goldman Sachs in structuring" the deal, Appleby said. "A final decision on underwriters will be made at a later date."

The corporation will also need a ruling from the Internal Revenue Service to certify how much of its $168 million in outstanding debt can be linked to the hotel. Without the ruling, the deal cannot proceed.

As with the refunding, many details of the property sale are not publicly available. Underwriters at J.P. Morgan have just recently begun to examine the legal implications of the sale, including the lease agreements between the UN development corporation and the city.

A private consultant hired by the agency agrees with the city's assessment said that the sale will likely produce enough money to retire all the bonds associated with the hotel and to furnish the city with $65 million in revenues, Appleby said.

But municipal bond executives with knowledge of the transaction say that precise estimates are difficult to determine. "The hotel is a good property, but no one really knows what the property is worth at this point," one public finance executive said.

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