TD Bank and Zarwin Baum Team to Help the Pennsylvania Turnpike Commission Mitigate Risk

Zarwin Baum represented TD Bank in the renewal of its $225 million letter of credit in support of the Pennsylvania Turnpike Commission’s Series of 2020 Bonds. Public Finance Chair Alan Wohlstetter represented TD Bank when the original five-year letter of credit was issued in 2020, allowing the Commission to issue bonds that bear interest at a 7-day tax-exempt rate. Under the structure, bondholders have the right to tender their bonds for purchase weekly when the rate is reset. All tendered bonds are, in turn, remarketed by TD Securities. TD’s letter of credit not only ensures that principal and interest on the Bonds will be paid timely but also that the remarketing obligation will be met. The interest rate savings from such a structure are significant.

Why are letters of credit important if the bonds are simply going to be remarketed? In 2009, issuers were issuing bonds with the right to weekly tender without letters of credit, with the remarketing obligation a naked obligation to remarket the bonds on the part of the issuer, with the proceeds from the remarketing paying off the tendering bondholders. Many such remarketings failed that year when there was not sufficient liquidity in the market; no one wanted to buy the bonds at any price. As a result, the issuer had to buy the tendered bonds themselves and pay a higher interest rate. TD Bank’s letter of credit protects the Commission against that risk.

Zarwin Baum closed an identical deal for TD Bank in 2024 when its $140 million letter of credit was expiring in support of the Commission’s Second Series of 2019 Bonds.

Partner Jim Molinari collaborated with Alan on all four of the TD Bank engagements.