"Fiscal cliff" deal extends New York rebuilding bonds


Congressional lawmakers added a provision into legislation on avoiding the U.S. "fiscal cliff" that extends for two years issuance of Liberty Bonds, the debt authorized after the September 11, 2001, attacks to help rebuild New York, according to a copy of the bill.

Liberty Bonds are unlike many sold in the $3.7 trillion tax-exempt municipal bond market - they are issued by the New York Liberty Development Corporation to make loans to companies and they are solely secured by loan payments from those companies. The corporation is an arm of the state-controlled Empire State Development, which was created to help finance rebuilding in lower Manhattan.

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For example, $1.24 billion of revenue bonds sold in 2005 were used for a loan for building the headquarters of Goldman Sachs. Those bonds are repaid with money Goldman puts toward its loan. This allowed Goldman to borrow at tax-exempt rates, which are often lower than corporate ones.

The bond program was set to expire at the end of 2012, but the late-night deal on the combination of tax and spending changes that had made up the "fiscal cliff" included an extension through 2014.

Goldman was the lead manager on the last sale of the bonds, $1.65 billion of new and refunding revenue debt, in July. JP Morgan was the lead underwriter for the previous sale, in March, of $450 million revenue refunding bonds.

(Reporting by Lisa Lambert; Editing by Jan Paschal)