Wells Fargo Bank's Corporate Trust Services has made its debut as an auction-rate agent in the municipal market and has simultaneously rolled out its online auction Web site, called Wells Fargo Online Auctions.
Prior to the Minneapolis-based firm's moves, there were four firms that were authorized and had the capability to operate as auction-rate agents in the municipal market. For a number of years, the top two were the Bank of New York and Deutsche Bank. Wilmington Trust and Wachovia Bank were the other two to enter into the market as auction-rate agents.
The agent's role in an auction-rate debt transaction is to execute the auction process. The agent is independent of the other parties in order to promote fairness in the process.
Auction-rate securities are a form of variable-rate debt that do not require a put option and therefore do not require a credit facility backing the security. In recent years, the volume of auction-rate debt in the muni market has soared. As of May 10,2004, issuers have sold $14.66 billion in auction-rate securities in 132 issues, according to Thomson Financial.
Jenni Minardi, senior vice president of Wells Fargo Corporate Trust Services, said the bank on April 29 settled its first bond deals as an auction-rate agent. Wells Fargo served as an agent for the Brazos Group on four taxable student-loan asset-backed deals totaling $430.1 million. Minardi said the bank's move to become an agent was a natural complement to other bond trustee services that Wells Fargo Corporate Trust Services has traditionally offered.
"Auction agent services are a natural add-on service, given our strength in student loans, health care, and other sectors frequently issuing auction-rate securities," Wells Fargo vice president Alan Spadine said in an e-mail.
The issuers for the four student loan deals were Edinvest Co., Federated Student Finance Corp., EFSI, and the Trinity Higher Education Authority.
The largest deals so far this year have been a $1 billion deal from the Arizona Educational Loan Marketing Corp. on Jan. 29 and Feb. 3, and a $1 billion deal from NorthStar Education Finance sold on March 30.
The other agents also have online capabilities. Some online capabilities, on a limited scale, provide information on deals, while others allow dealers to submit bids electronically and allows the agent to deliver results to the dealers.
Wells Fargo's online capabilities allow dealers to submit bids via a secured line over the Internet. It is working on establishing direct electronic links between its auction agent system and the dealer's trading systems, Spadine said.
Rob Sandt, a vice president at Deutsche, said the bank in 2001 rolled out a Web-based system that enables dealers to submit bids electronically. The system also allows Deutsche to deliver results to issuers and dealers electronically.
Karen Peetz, executive vice president and head of corporate trust at Bank of New York, said her firm currently has a Web site that includes auction rates, housing, student loans, and structured finance, among other securities.
She added that BNY is working on expanding the site's connection to its auction-rate program, so parties can receive more comprehensive information on structured finance and other deals. The upgraded site is expected to be completed in June. On its current site, dealers also are able to submit bids electronically.
Both Wilmington and Wachovia also have online capabilities.
