Ground Zero Work Halted
Wall Street Journal reports:
The effort to finance a new World Trade Center tower has hit a new snag.
Problems in selling new bonds, if not resolved, could eventually halt construction of Tower 4 at ground zero.
A group of institutional investors has helped delay a planned $1.3 billion bond sale meant to finance construction of the 4 World Trade Center over concerns about how the deal is structured.
The 72-story building is one of two under construction at ground zero, the other being the 104-story 1 World Trade Center. Both are slated to be finished by the end of 2013.
The investor group, which includes mutual-fund giant Fidelity Investments, holds stakes in the general debt of the Port Authority of New York and New Jersey, which is backing the debt of Tower 4.
The group is concerned the new debt would be senior to existing debt, and that issuing it would erode the value of their holdings. They say bond documents don't permit senior debt to be issued, a point the Port Authority contests.
The investor opposition raises the possibility that the financing could face further delays, and that costs could be higher than anticipated.
Tower 4 is being developed by Larry Silverstein while the Port Authority is developing Tower 1.
The concerns are the latest setback for the two parties as they seek to finance the 1.8-million-square-foot Tower 4. In December, they shelved a bond sale in a bet that interest rates on municipal bonds would fall. Interest rates stayed high.
They sought to sell a restructured deal last week but then ran into opposition from the investor group. Now the deal has been shelved again.
The problems come as construction progresses rapidly on the 16-acre site after years of delays and infighting. Silverstein Properties and the Port Authority last year renegotiated their lease, breaking a long impasse. Towers 1 and 4 are rising at about a floor per week, and Mr. Silverstein is building the basements for Towers 2 and 3. Further construction of the latter two buildings depends on the market.
Tower 4 is more than 20 stories up. Until now, it has been funded with insurance proceeds from the terrorist attacks. But Mr. Silverstein ultimately needs to sell the tax-exempt "Liberty Bonds" to finish construction. The Port Authority has said the financing must be in place by year-end to avoid construction delays.
"We made the decision to delay the Tower 4 Liberty Bond sale due to market considerations, including the volatile rate environment in the municipal debt markets and questions from investors about the deal structure," the Port Authority and Silverstein Properties said in a joint statement. "We plan to move forward with the Liberty Bond financing once the municipal markets have settled down and we have addressed investor issues."
