The United Nations Development Corp. is scheduled to return to the municipal bond market today with a $166.5 million refunding that officials say will dramatically reduce the corporation's debt service costs well into the next century.

The refunding will mark the public benefit corporation's first bond issue since 1986 and save it almost $2 million in debt service each year until 2023, corporation officials say.

The deal, which comprises serial and term bonds with a final maturity in 2026, consists of $130.1 million in tax-exempt senior bonds, $32 million of subordinated tax-exempt securities, and $4.35 million of taxable senior bonds.

Underwriters at Goldman, Sachs $ Co., an underwriter and book-runner on the issue, say they expect interest rates on the long end of the deal to fall below 7%. They refused to elaborate.

Officials have credited Goldman Sachs with developing a refinancing technique that nearly eliminates the federal tax penalty associated with refunding securities previously sold to refund older issues.

The underwriters were able to avoid the tax penalty by using negative arbitrage resulting from the refunding. Under the federal tax law, issuers can use effects of negative arbitrage to reduce or eliminate the tax penalty, underwriters say.

The deal, jointly underwritten by Goldman Sachs and Merrill Lynch & Co., has also received mostly favorable reviews from the Wall Street rating agencies.

Fitch Investors Service rates the deal's taxable and tax-exempt senior bonds A-plus and its subordinated bonds A with a "stable" credit trend. Moody's Investor Service ranks both classes of debt A.

Established by the state Legislature in 1968, the corporation provides office facilities and lodging for officials of the United Nations and its agencies. Under that legislation, the corporation leases three buildings from the city and rents office space to the United Nations and other U.N.-related organizations. The corporation also operates the UN Plaza Hotel.

The corporation forecasts that net revenues will cover debts service on the securities 1.76 times in 1993. In future years, analysts say, revenues will cover debt service about 1.6 times annually.

Vincent J. Barberio, a vice president at Fitch, said the greatest threat to the financial stability of the corporation is the possible relocation of the United Nations from New York City. Rumors have swirled for years that the United Nations or some of its agencies may leave the city, but Barberio described the chances of the United Nations' departure at the moment as remote.

For example, he said there has been speculation that the United Nations may relocate an agency in Germany. However, he said such a move would have little effect on the corporation's revenues.

Yet despite the positive aspects of the deal, it has not received favorable reviews fro some people in City Hall, according to sources in the municipal bond market.

These sources, speaking on a not-for-attribution basis, said some city officials have criticized the corporation because it did not seek city approval for the bond deal.

At issue for some members of Mayor David N. Dinkins' finance staff is the maintenance of a coherent debt-issuance policy for all entities that are related to city government, sources say.

In April, City Comptroller Elizabeth Holtzman in a letter to Dinkins called on the city to expert greater control over the tax-exempt bonding of agencies and corporations related to city government. The letter followed a $32 million bond deal issued by the Grand Central District Management Association Inc., a city business improvement district. City finance officials also joined Holtzman in their criticism of the deal, which was also not reviewed by the mayor's finance staff even though the deal's proceeds counted against the city's debt and tax ceilings.

In contrast to Grand Central, which was also underwritten by Goldman Sachs, the development corporation was established by state lawmakers.

Also unlike Grand Central, the corporation's bonding does not count against the legally established limits on city debt. The offices of state Comptroller Edward V. Regan, Gov. Mario M. Cuomo, and the state Public Authorities Control Board are the only government agencies mandated to review the issue.

Still, several city finance officials say the corporation violated "protocol" by failing to provide the city with an opportunity to review the deal even though three mayoral appointees sit on the corporation's 12-member board, city sources said.

In addition, one city source said it is "customary" that the corporation issue a request for proposals document to the Wall Street investment banking community before choosing underwriters.

Thomas Appleby, the corporation's president and chief executive officer, said because the agency was established by the state Legislature and not the city, its bonding status "is a little different" than that of the Grand Central District.

Appleby also said the district has worked closely with the city in the past and continues to do so. He cited an agreement by the corporation in 1991 to issue revenue bonds in order to provide budget relief for the city. City officials later withdrew the deal.

In reference to today's scheduled issue, Appleby said he told Mark Page, deputy director and general counsel of the city Office of Management and Budget, about the corporation's refunding. Appleby said Page was in favor of the issue.

Page was unavailable for comment.

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