N.Y. Urged to Clear Way for Minority And Women-Owned Underwriters

Issuers of state-backed debt in New York should change their criteria to eliminate barriers of entry to minority- and women- owned underwriting firms, a task force announced yesterday.

Paul Williams Jr., chairman of New York's task force on minority- and women-owned underwriting and financial services firms, said that the proposed changes "will bring new firms with new ideas with new energy to this marketplace and make New York State the leader in the use of MWBE firms."

Williams is also the executive director of the Dormitory Authority of the State of New York. The task force, which was created by an executive order of Gov. David Paterson in June, released a list of recommendations yesterday to increase participation of MWBE firms as senior managers and co-managers on bond deals in the state.

Among the recommendations were changes to the request-for-proposals process that would create a universal RFP template and consistent practices for issuers of state-backed debt. Under the proposals, issuers would use a two-year RFP cycle with one six-month renewal. The issuers could extend that for another six months only upon "extraordinary circumstances."

The task force recommended revising questions on RFPs to eliminate barriers to entry that can affect MWBE firms. Some firms have national experience underwriting large issues but haven't had the opportunity to senior-manage deals in New York, which has been a criterion for some issuers.

The task force recommended looking at national experience with similar credits. The proposed criteria would also ask about experience with small deals, not just large ones. Also included would be questions about the experience of a firm's personnel at other firms - which could be considerable at a time when many smaller firms are scooping up seasoned bankers from large investment banks that have merged or left the business.

The recommendations also dealt with syndicate formation and designation of fees. Issuers should use various syndicate structures that increase participation of MWBE firms, under the proposal.

Some of those would include using minority- and women- owned firms as sole senior manager on deals; giving them 40% to 50% of the fee; using two senior managers on larger deals with one of those firms being an MWBE firm with each firm getting 30% of the fee; using more than two firms as senior managers; and using an MWBE firm and other small firms as co-senior managers. The recommendations also include partnerships between firms.

Firms would also face a review after one year and could be moved up or down between tiers based on how well they performed.

The task force will vote on the recommendations on Oct. 30. The body is made up of representatives from DASNY, the New York State Housing Finance Agency, the New York State Thruway Authority, the Empire State Development Corp., and the New York State Environmental Facilities Corp., as well as three gubernatorial appointees. The recommendations are subject to approval by those issuers' boards.

The task force also made recommendations that its members can't implement, such as a recommendation that New York should encourage private equity investment in minority- and women-owned underwriting firms through the state pension fund.

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