The New York State Thruway Authority will initiate a new procedure intended to increase participation of minority-owned firms in underwriting when it goes to market with the sale of up to $1 billion of bonds next month.
The board approved the sale of up to $500 million of personal income tax revenue bonds and up to $500 million of bonds on the New York State Highway and Bridge Trust Fund credit at its monthly board meeting yesterday.
The bonds are issued at the request of the state division of budget and are backed by state appropriation. However, the deals are likely to be smaller because each authorization includes $100 million of refunding and Thruway chief financial officer John Bryan said he didn't expect rates to be favorable for a refunding.
The new procedure will allow minority-owned firms to serve as co-coordinating managers in support of the book-running firm.
"We think that will be very helpful in the minority firms gaining experience at a senior level so that whenever we decide to go out and issue for a new bankers list they'll be better positioned to score higher," Bryan said.
The arrangement will also help out the firms' financials, he said. "Our bond transactions are so large they tend not to score so well on the capitalization section" of the agency's requests for proposals.
Last month, Gov. David Paterson issued an executive order creating a task force to recommend new guidelines for the procurement process of underwriters for state-supported debt at certain public authorities including the Thruway Authority.
The guidelines, which are intended to increase minority firm participation as lead underwriters, are to be created by Sept. 1 and authority boards must consider implementing them by Oct. 15.
The co-coordinating manager structure is based on one used by the authority in 2005 when Goldman, Sachs & Co. was book-runner on a $2.8 billion restructuring, and Citi served in a supporting role.
Co-coordinating managers will be selected from its list of approved co-managers and will help with marketing the bonds, going to rating agencies and soliciting insurance. They will also share in the book-runner's fee but the breakdown is still being worked out, Bryan said.
"It's a very good way to get minority representation at a senior level on all of our transactions," he said. The new position is temporary and could change once the task force makes its recommendations. Thruway Authority deals typically have a book-runner, three co-senior managers and six co-managers. The co-coordinating manager position will be in addition to those.
Loop Capital Markets, LLC will serve as co-coordinating manager on the PIT deal which is expected to price the week of Aug. 25. Merrill Lynch is book-runner on the deal. Harris Beach PLLC is bond counsel.
Siebert Brandford Shank & Co., LLC will serve as co-coordinating manager on the trust deal which is expected to price the week of Aug. 18. Goldman is book-runner on the deal. Nixon Peabody LLP is bond counsel.
First Southwest is financial adviser on the deals.
Also yesterday, the authority approved asking the John A. Volpe National Transportation Systems Center to do an independent analysis of its practices to help it cut costs in the face of declining revenues and high gas prices. Toll revenues at the authority declined by $12.3 million last year to $581.7 million compared to 2006. The authority did not provide 2008 toll revenue figures by press time.