NJ Municipal Bond Counsel
NJ Municipal Bond Counsel ()

Larger bond issues but fewer of them—that’s the general takeaway from New Jersey’s public finance market this year, which again included a significant number of refinancings of existing government debt.

The list of active bond counsel included mostly familiar names, though the firms occupying the top two spots last year traded places: Wilentz, Goldman & Spitzer of Woodbridge is No. 1, and McManimon, Scotland & Baumann of Roseland is No. 2.

According to data compiled by Thomson Reuters, there were 118 issues worth a combined $4.58 billion in the first half of 2017. That’s a 7.3 percent increase in total value and a 31.8 percent decrease in the number of issues (from $4.28 billion and 173 issues last year).

It’s the lowest number of bond issues in some time, though it’s the second straight year of increase in value: There were 180 issues worth a combined $3.35 billion in the first half of 2015; in 2014, 147 issues worth $5.01 billion; in 2013, 165 issues worth $9.33 billion; in 2012, 217 issues worth $5.23 billion; in 2011, 117 issues worth $4.62 billion; in 2010, 165 issues worth $6.79 billion; and in 2009, 145 issues worth $6.76 billion.

Larger issues this year help explain the simultaneous decrease in number and increase in total value. Last year, the single largest bond was a $202.45 million revenue and refunding bond issued by the New Jersey Educational Facilities Authority. This year, several bond issues eclipsed that: $627.66 million in transportation project sublease and refunding bonds by the New Jersey Economic Development Authority in January; $600 million in revenue bonds by the New Jersey Turnpike Authority in March; $588.79 million in revenue and refunding bonds by the New Jersey Health Care Facilities Financing Authority in April; $342.24 million in revenue and refunding bonds by the Educational Facilities Authority in March; and $250 million in student loan and refunding bonds by the New Jersey Higher Education Student Assistance Authority in May, according to the Thomson Reuters data.

Refunding bonds allow government entities to refinance existing debt, when lower interest rates incentivize it.

Anthony Pannella Jr., who heads Wilentz’s public finance practice, said today’s bond counsel face challenges as state laws and regulations—such as the 20-day notice requirement—make it difficult for issuing authorities to keep up with interest rate fluctuations. Waiting a couple weeks can make the difference in whether a refunding is worth doing, he said.

“The market is nuts,” Pannella said, noting that, unlike eras past, there’s less of a nexus between improved stock market performance and borrowing costs, so refundings continue.

Tricia Gasparine and Bernard Davis of Chiesa Shahinian & Giantomasi in West Orange also noted the high number of refundings.

“I think issuances generally are down, and I think that’s going to continue,” Gasparine said.

Davis added: “Once people settle into a new plateau of interest rates, I think you’ll see people come back [to the market].”

Wilentz this year tops the bond counsel list, which is arranged in order of market share. The 13 bond issues with a combined total value of $1.33 billion handled by the firm represented a 29.1 percent market share. Wilentz served as bond counsel in the $600 million Turnpike Authority issue and the $588.79 million Health Care Facilities Financing Authority issue. The firm also handled smaller bond issues on behalf of local government units, and $57.24 million in refunding bonds issued by the Newark City Housing Authority.

McManimon Scotland, last year’s list-topper, moves to No. 2. The firm handled 31 issues worth a combined $1.2 billion, representing a 26.1 percent market share. The firm typically handles smaller bond issues on behalf of a broad base of clients, many of which are local entities, though this year it did counsel the Educational Facilities Authority’s $342.24 million bond, as well as another $119.91 million in revenue and refunding bonds by the same authority. McManimon Scotland’s 31 bond issues were the most handled by any one firm.

The Chiesa firm occupied the third spot, after ranking No. 9 last year. The firm handled four issues worth $675.8 million—including this year’s largest issue, by the Economic Development Authority.

Gasparine and Davis noted that Chiesa Shahinian’s public finance practice mostly works with state authorities, as the firm’s representation of builders and others in the redevelopment practice can create conflicts with local government units.

The fourth spot was shared by two firms: GluckWalrath of Trenton and Parker McCay of Mount Laurel, which each had a 5.4 percent market share and handled bonds totaling $246.3 million. GluckWalrath handled seven bond issues, while Parker McCay handled 17. There was little movement for those firms: Last year, GluckWalrath ranked third; Parker McCay, sixth.

The only other firm with a market share of at least 5 percent is McCarter & English of Newark, which handled six bond issues worth $229.5 million in total. The firm ranks sixth, after ranking fourth last year.

Only one firm on the bond counsel list failed to appear last year: Pearlman & Miranda of Bloomfield. It ranked ninth, handling a single bond issue on behalf of Atlantic City in the amount of $69.8 million, for tax appeal refunding.

Lawyers said it’s not surprising to see familiar names.

“There was a time when the eligibility of projects in the Internal Revenue Code was much broader … and there were a lot of firms in New Jersey trying to get into the practice,” Davis said. But it can be an “expensive” practice and, “if you don’t have the volume, it’s not worth your while,” he said.

Gasparine added: “If you’re not really committed to it, firms kind of fall away.”

At the state level, approved firms bid a fee cap and are subject to a reduced, blended rate for supplemental work, they said.

According to Pannella, there’s a “near-universal method” for compensating bond lawyers for municipal, county and board of education work: $5,000 to $10,000 fixed fees for bond issues, and hourly rates of $150 to $200 for advice and counsel provided beyond the nuts and bolts of the bond issue. He also noted flat fees of $300 to $600 for authoring routine bond ordinances, and 50 cents to $1, per $1,000 borrowed, for handling issuance of notes, which are shorter-term borrowing instruments that mature within a year.

Pannella said ranking firms by principal amount “speaks nothing as to the caliber of the practice [or] the firm’s dedication to the practice,” noting that smaller bond issues on behalf of local authorities might yield higher fees for attorneys.

Pannella, like other bond counsel, was eager to talk about the history of what is known to be a very collegial public finance practice in New Jersey. He got his start in the 1980s at Mudge Rose in New York, which boasted 65 bond lawyers and got most of the New Jersey work at the time. He credits Edward McManimon III and now-retired Jack Kraft, once partners, with putting New Jersey-based public finance practice on the map.

“I, too, scoffed at New Jersey’s lawyers,” said Pannella, who went to Wilentz in 1990. “We were wrong. … Everybody who practices municipal bond finance in New Jersey owes them a debt of gratitude.”

Contact David Gialanella at dgialanella@alm.com. On Twitter: @dgialanellanjlj.

Larger bond issues but fewer of them—that’s the general takeaway from New Jersey’s public finance market this year, which again included a significant number of refinancings of existing government debt.

The list of active bond counsel included mostly familiar names, though the firms occupying the top two spots last year traded places: Wilentz, Goldman & Spitzer of Woodbridge is No. 1, and McManimon, Scotland & Baumann of Roseland is No. 2.

According to data compiled by Thomson Reuters, there were 118 issues worth a combined $4.58 billion in the first half of 2017. That’s a 7.3 percent increase in total value and a 31.8 percent decrease in the number of issues (from $4.28 billion and 173 issues last year).

It’s the lowest number of bond issues in some time, though it’s the second straight year of increase in value: There were 180 issues worth a combined $3.35 billion in the first half of 2015; in 2014, 147 issues worth $5.01 billion; in 2013, 165 issues worth $9.33 billion; in 2012, 217 issues worth $5.23 billion; in 2011, 117 issues worth $4.62 billion; in 2010, 165 issues worth $6.79 billion; and in 2009, 145 issues worth $6.76 billion.

Larger issues this year help explain the simultaneous decrease in number and increase in total value. Last year, the single largest bond was a $202.45 million revenue and refunding bond issued by the New Jersey Educational Facilities Authority. This year, several bond issues eclipsed that: $627.66 million in transportation project sublease and refunding bonds by the New Jersey Economic Development Authority in January; $600 million in revenue bonds by the New Jersey Turnpike Authority in March; $588.79 million in revenue and refunding bonds by the New Jersey Health Care Facilities Financing Authority in April; $342.24 million in revenue and refunding bonds by the Educational Facilities Authority in March; and $250 million in student loan and refunding bonds by the New Jersey Higher Education Student Assistance Authority in May, according to the Thomson Reuters data.

Refunding bonds allow government entities to refinance existing debt, when lower interest rates incentivize it.

Anthony Pannella Jr., who heads Wilentz’s public finance practice, said today’s bond counsel face challenges as state laws and regulations—such as the 20-day notice requirement—make it difficult for issuing authorities to keep up with interest rate fluctuations. Waiting a couple weeks can make the difference in whether a refunding is worth doing, he said.

“The market is nuts,” Pannella said, noting that, unlike eras past, there’s less of a nexus between improved stock market performance and borrowing costs, so refundings continue.

Tricia Gasparine and Bernard Davis of Chiesa Shahinian & Giantomasi in West Orange also noted the high number of refundings.

“I think issuances generally are down, and I think that’s going to continue,” Gasparine said.

Davis added: “Once people settle into a new plateau of interest rates, I think you’ll see people come back [to the market].”

Wilentz this year tops the bond counsel list, which is arranged in order of market share. The 13 bond issues with a combined total value of $1.33 billion handled by the firm represented a 29.1 percent market share. Wilentz served as bond counsel in the $600 million Turnpike Authority issue and the $588.79 million Health Care Facilities Financing Authority issue. The firm also handled smaller bond issues on behalf of local government units, and $57.24 million in refunding bonds issued by the Newark City Housing Authority.

McManimon Scotland, last year’s list-topper, moves to No. 2. The firm handled 31 issues worth a combined $1.2 billion, representing a 26.1 percent market share. The firm typically handles smaller bond issues on behalf of a broad base of clients, many of which are local entities, though this year it did counsel the Educational Facilities Authority’s $342.24 million bond, as well as another $119.91 million in revenue and refunding bonds by the same authority. McManimon Scotland’s 31 bond issues were the most handled by any one firm.

The Chiesa firm occupied the third spot, after ranking No. 9 last year. The firm handled four issues worth $675.8 million—including this year’s largest issue, by the Economic Development Authority.

Gasparine and Davis noted that Chiesa Shahinian’s public finance practice mostly works with state authorities, as the firm’s representation of builders and others in the redevelopment practice can create conflicts with local government units.

The fourth spot was shared by two firms: GluckWalrath of Trenton and Parker McCay of Mount Laurel, which each had a 5.4 percent market share and handled bonds totaling $246.3 million. GluckWalrath handled seven bond issues, while Parker McCay handled 17. There was little movement for those firms: Last year, GluckWalrath ranked third; Parker McCay , sixth.

The only other firm with a market share of at least 5 percent is McCarter & English of Newark, which handled six bond issues worth $229.5 million in total. The firm ranks sixth, after ranking fourth last year.

Only one firm on the bond counsel list failed to appear last year: Pearlman & Miranda of Bloomfield. It ranked ninth, handling a single bond issue on behalf of Atlantic City in the amount of $69.8 million, for tax appeal refunding.

Lawyers said it’s not surprising to see familiar names.

“There was a time when the eligibility of projects in the Internal Revenue Code was much broader … and there were a lot of firms in New Jersey trying to get into the practice,” Davis said. But it can be an “expensive” practice and, “if you don’t have the volume, it’s not worth your while,” he said.

Gasparine added: “If you’re not really committed to it, firms kind of fall away.”

At the state level, approved firms bid a fee cap and are subject to a reduced, blended rate for supplemental work, they said.

According to Pannella, there’s a “near-universal method” for compensating bond lawyers for municipal, county and board of education work: $5,000 to $10,000 fixed fees for bond issues, and hourly rates of $150 to $200 for advice and counsel provided beyond the nuts and bolts of the bond issue. He also noted flat fees of $300 to $600 for authoring routine bond ordinances, and 50 cents to $1, per $1,000 borrowed, for handling issuance of notes, which are shorter-term borrowing instruments that mature within a year.

Pannella said ranking firms by principal amount “speaks nothing as to the caliber of the practice [or] the firm’s dedication to the practice,” noting that smaller bond issues on behalf of local authorities might yield higher fees for attorneys.

Pannella, like other bond counsel, was eager to talk about the history of what is known to be a very collegial public finance practice in New Jersey. He got his start in the 1980s at Mudge Rose in New York , which boasted 65 bond lawyers and got most of the New Jersey work at the time. He credits Edward McManimon III and now-retired Jack Kraft, once partners, with putting New Jersey-based public finance practice on the map.

“I, too, scoffed at New Jersey’s lawyers,” said Pannella, who went to Wilentz in 1990. “We were wrong. … Everybody who practices municipal bond finance in New Jersey owes them a debt of gratitude.”

Contact David Gialanella at dgialanella@alm.com. On Twitter: @dgialanellanjlj.