Regional News

BoA to Buy $43M of ARS in Mass.

Massachusetts may be heading closer to a settlement agreement with Bank of America Corp., as the bank agreed to redeem $43 million of auction-rate securities owned by the Massachusetts Turnpike Authority and the Massachusetts Housing Partnership.

Secretary of the Commonwealth William Francis Galvin continues to negotiate with Bank of America regarding the sale of auction-rate securities to Massachusetts investors, but in the meantime Bank of America will buy at par $18 million in auction-rate investments from MassPike, while the MHP will gain about $25 million for its ARS, according to Galvin spokesman Brian McNeff.

"This was something that the Securities Division had been asking for as part of a settlement," McNeff said. "They have done it, but the overall settlement is still being worked on."

Bank of America spokeswoman Louise Hennessy declined to comment on the negotiations with Galvin's office.

The payment agreement will reduce MassPike's total auction-rate investments to $10 million of ARS purchased from Morgan Stanley. In January, the authority began evaluating its auction-rate investments and sold off many of them.

The authority also received in early May a $4 million payment from UBS Securities LLC to redeem MassPike's auction-rate investments after state Attorney General Martha Coakley worked out a $35 million settlement with the Swiss bank.

MassPike executive director Alan LeBovich said investing in ARS has not affected the authority's finances, but eliminating auction-rate investments from the agency's portfolio is prudent.

"We had no problems. We were getting our current interest, but we're glad that [Galvin] did it so we'll just get out of it," LeBovich said. "It didn't cost us anything, we didn't make anything, we didn't lose anything. It doesn't change our financial situation at all, despite what some people report, and we had our own program underway to get out of the auction-rate securities. We started in January, when I started here, a program to get out of them."

MassPike oversees the 138-mile long Massachusetts Turnpike, which connects Boston to the New York border.

Like MassPike, the MHP was also glad that Bank of America will redeem its ARS, but MHP spokesman Rus Lodi declined to discuss the issue further.

"We're pleased that Bank of America has agreed to repurchase our auction-rate securities and are grateful to [Galvin] and other state and federal regulators who have worked tirelessly in seeking a fair resolution for investors," said MHP executive director Clark Ziegler in a prepared statement.

The MHP oversees a $1 billion loan pool used to create and preserve affordable housing. A 1990 state law created the pool and requires companies that purchase Massachusetts banks to provide the MHP with funds for low-income housing.

The potential settlement with Bank of America follows the May agreement with UBS and a tentative settlement that Galvin reached last week with Merrill Lynch & Co. on ARS that it sold to Massachusetts investors. That agreement includes Merrill redeeming, at par, all illiquid ARS held by investors with less than $3 million of deposits beginning Oct. 15.



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