Massachusetts Postpones Notes Sale Until Next Week

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Due to current market turmoil, Massachusetts late yesterday postponed to next Tuesday its upcoming $700 million general obligation short-term note sale.

The competitive sale was originally set for tomorrow.

The new-money transaction will help the commonwealth maintain its cash flow before the state collects income tax revenues in the spring. Bidding on the deal is scheduled between 10:30 a.m and 11 a.m Eastern Daylight Time on the state treasurer's electronic bidding Web site at www.bidmass.com.

Edwards, Angell, Palmer & Dodge LLP is bond counsel and there is no outside financial adviser.

The competitive transaction will be comprised of two fixed-rate series of equal amount, Series 2008B, which will mature on April 30, and Series 2008C, which will mature on May 29.

Moody's Investors Service rates the short-term transaction MIG-1. Fitch Rating rates the deal F1-plus. Standard & Poor's expects to release their ratings on the deal ahead of the sale.

The commonwealth carries AA ratings from Fitch and Standard & Poor's on its $16 billion of outstanding long-term GO debt. Moody's rates the credit Aa2.

While the municipal market has been anything but calm, the Bay State is still moving forward with the GO note deal, given that the debt is a straightforward, short-term sale of fixed-rate paper, according to officials. This comes as Connecticut officials downsized a $479 million special tax obligation refunding bond deal to $100 million due to market conditions on Sept. 17. Goldman, Sachs & Co. bought the bonds.

Colin MacNaught, the state's assistant treasurer, said that his team is evaluating the market on a daily basis.

"We're constantly monitoring the municipal market, looking at both the short-term and long-term segments of the market," MacNaught said. "We'll take the steps necessary to ensure that the commonwealth gets best pricing and if that means adjusting the sale date, then we'll do that."

Yet analysts said they expect money market funds will probably welcome the short-term offering and that the state should see enough demand for the notes.

"I think right now the market needs natural municipal paper for short-term," said Richard Ciccarone, managing director and chief research officer for McDonnell Investment Management LLC. "So it should be attractive to money market funds."

In fiscal 2008, Massachusetts sold $800 million of short-term notes. Ciccarone pointed to tight budget conditions that may prompt state governments to tap into the short-term market to help balance cash flows.

"We'll probably see more working capital positions in the future as budget situations are changing and budgets are coming in under expectations," he said. "So you're probably more likely to see that that would be the case. But still, I think even with that said I think the market would love to see some more natural higher-grade, state-sector quality paper."

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