Official Statement ! New Jersey Treasury Department! Christopher J. Santarelli, Deputy Director of Communications! ! ! The March 7 transaction completed between the State, through the Tobacco Settlement Financing Corporation, and holders of certain capital appreciation bonds (CABs) netted the State $91.6 million in general fund savings immediately, $136.7 million in Net Present Value (NPV) savings, $1.226 billion in nominal debt service savings, and assures CAB bonds will now defease on schedule giving the State the full residual value of revenue from the Master Tobacco Settlement from 2041 to 2049—which is projected now at $1.58 billion. In exchange, the State pledged 23 percent of revenues to the State from the tobacco settlement to be paid to CAB bondholders through 2017 to 2023 ($406 Million), improving the bonds’ current ratings from CCC + to A-.   In light of current market conditions, we believe we have an affirmative obligation to identify and pursue appropriate and often routine opportunities to realize debt service and other savings.  This transaction meets the same sound policy test this Administration has taken in evaluating any such financial transaction throughout the last four years: identify and achieve both NPV savings and nominal debt service savings (where applicable) while avoiding any extension of maturities.    Some things to consider on why debt service owed by the Tobacco Settlement Financing Corporation should be a concern of the Depart of the Treasury and State:   · During Fiscal Year 2003 the TSFC was presented as a discreet component unit of the State in its financial statements.  Following the issuance of GASB Technical Bulletin No. 2004-1, the TSFC is now required to be shown as a blended component unit of the State.  Thus, even though the tobacco bonds are the sole obligation of the TSFC and not the State, a default in payment of the bonds would have to be reflected in the State’s financial statements.   ! · ! · The State takes very seriously its relationship with bondholders and the investment community. Although not legally compelled to resolve a potential default situation with the tobacco bonds, the State sees an advantage in maintaining good relations with the tobacco bond investors as they are likely to invest in other bonds of the State. By New Jersey Statute (52:18B-3), the Tobacco Settlement Financing Corporation is in, but not of, the Department of Treasury and governed by the State Commissioner of Health and Senior Services and the State Treasurer, who shall be members ex officio, and one public member appointed by the Governor. According to the statute, the State Treasurer shall serve as the chairperson of the corporation.