Massachusetts is looking to revamp its underwriting team as the state's current pool of investment banking contracts will expire by mid-October.
The state's Department of Treasury yesterday released a request for qualifications for investment banking services, with responses due by Sept. 26 at 12 p.m., Eastern Daylight Time.
The department anticipates selecting four to six companies to serve in its senior management pool, with another four to six firms comprising its co-senior manager team. In addition, the state may place 10 to 12 companies for its co-manager pool, according to the RFQ. Contracts will extend for three years, beginning on Oct. 15.
Selected firms will have a sizeable amount of volume to work with as officials anticipate selling, on average, $2 billion of general obligation debt annually during the next five years and another $1 billion to $2 billion of short-term debt for cash-flow purposes over that same time frame.
Of those borrowing amounts, the Treasury Department has a target goal of having minority-owned and women-owned firms underwrite 5% of Massachusetts debt sales. In addition, the state treasury office "expects each prospective book-running senior manager to propose a syndicate that includes at least one co-manager which is a minority-owned or women-owned firm," according to the RFQ.
Proposals should detail underwriting experience since Jan. 1, 2006, and institutional and retail bond-sale capacity. The state is also asking interested applicants to indicate total capital, including equity capital and uncommitted excess net capital. The RFQ asks firms to indicate how much "uncommitted excess net capital is allocated to the municipal finance area of your firm, with comparable data for 2006, 2007, and year-to-date 2008."
The RFQ also requests companies to detail involvement in the subprime mortgage market and to summarize write-downs the firm has taken during the past year on collateralized debt obligations.
Companies should provide a short analysis of how best to structure the approximately $7.5 billion of GO debt the state expects to sell over the next five years, any refunding opportunities on the commonwealth's existing debt, and ways to augment retail demand, among other financing recommendations.
Massachusetts has about $16 billion of outstanding GO debt, $1.3 billion of outstanding special obligation revenue bonds, and $1.5 billion of outstanding grant anticipation revenue vehicle bonds, or Garvees.
Fitch Ratings and Standard & Poor's both rate Massachusetts AA. Moody's Investors Service rates the credit Aa2.
