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BERGER & MONTAGUE, P.C. BRINGS NEW JERSEY STATE COURT ACTION REGARDING HOUSING AUTHORITY OF THE CITY OF NEWARK REDEVELOPMENT BONDS

Posted: February 6, 2012
Source: PRNewswire
Practice Areas: Securities Litigation

Philadelphia, PA, February 6, 2012 - The law firm of Berger & Montague, P.C., with the law firm of Cohn Lifland Pearlman Herrmann & Knopf LLP serving as local counsel, has brought a class action in state court in New Jersey against the Housing Authority of the City of Newark and U.S. Bank, N.A., as trustee (jointly, the "Defendants") for the following bond issuances:

  • $200,420,000.00 Port Authority - Port Newark Marine Terminal Additional Rent-Backed Bonds, Series 2004 (City of Newark Redevelopment Projects) (CUSIP No. 65037RAJ(9),
  • $7,780,000 Housing Authority of the City of Newark Port Authority - Port Newark Marine Terminal Additional Rent Backed Bonds, Series 2007 (City of Newark Redevelopment Projects) (CUSIP No. 65037RCF5), and
  • $168,320,000 Housing Authority of the City of Newark Port Authority - Port Newark Marine Terminal Additional Rent-Backed Refunding Bonds, Series 2007 (City of Newark Redevelopment Projects) (CUSIP No.65037RCJ7) (collectively, the "Bonds").

The case seeks to certify a class that includes all bondholders, and successors-in-interest, who hold or held the above Bonds on and through December 5, 2011 and have been damaged thereby.

The complaint alleges state law claims for negligence and breach of negligence against the Defendants.  Initially, the Debt Service Reserve Fund for the Bonds was invested in a guaranteed investment contract ("GIC"), issued by MBIA Insurance Corporation ("MBIA").  In 2009, the GIC was cancelled following the downgrade of MBIA and the Debt Service Reserve Fund was subsequently invested in a money market fund which reinvested in U.S. Treasuries.  Investment earnings on the Debt Service Reserve Fund under the GIC were 5%.  Investment earnings since 2009 from U.S. Treasuries have been substantially lower than 5%.  According to a December 5, 2011 report issued by Standard & Poor's ("S&P"), in fiscal 2010, the investment earnings from the money market fund yielded a return lower than the amount needed, together with the annual rental payment, to fully meet the debt service on the Bonds.  To avoid a default, the Authority directed the trustee, U.S. Bank, to make a one-time transfer of approximately $82,000.00 from the construction fund set aside for completion of the projects to cover the shortfall.  S&P issued a substantial downgrade of the Bonds on December 5, 2011.  As a result of the eight-notch downgrade of the bonds from AA- to BB by S&P on December 5, 2011, the trading prices of the Bonds have been negatively impacted.  Bondholders who sold their Bonds since December 5, 2011 have incurred losses, and those who continue to hold the Bonds have seen the value of their holdings diminished as there is a market-perceived potential for default on the Bonds in the future and prior to maturity.

Berger & Montague is a nationally-recognized law firm and consists of over 60 attorneys, mostly representing plaintiffs in complex litigation.  The Berger firm has extensive experience representing institutions and other investor plaintiffs in securities litigation and has played lead roles in major cases over the past 30 years that have resulted in recoveries of billions of dollars to investors.  The firm has represented institutions and investors as counsel in such leading securities actions as Lehman, Merrill Lynch, Revlon, Rite Aid, Sotheby's, CIGNA, Waste Management, Sunbeam, Boston Chicken and IKON Office Solutions.

If you would like further information on this matter, please feel free to contact:

Robin Switzenbaum, Esq.
Berger & Montague, P.C.
1622 Locust Street
Philadelphia, PA  19103
Telephone:  (800) 424-6690 or (215) 875-4679
www.bergermontague.com

A copy of the complaint is available here.