BRADENTON, Fla. - Florida officials on Thursday selected 12 firms from 39 that applied to become part of the state's new underwriting pool for the next two years.
A syndicate from the pool will be selected for negotiated transactions if volatile market conditions prevent bonds from being sold competitively, Division of Bond Finance director Ben Watkins told the State Board of Administration Board of Trustees, which oversees his agency.
The SBA trustees, Gov. Charlie Crist, the state's elected chief financial officer, Alex Sink, and Attorney General Bill McCollum unanimously passed a resolution naming the underwriting pool members and authorizing negotiated transactions on selected financings. Florida typically sells bonds competitively.
Watkins said the bond market freeze since Sept. 14 has impaired the state's ability to borrow money to fund ongoing capital needs, so his office devised a strategy to put an underwriting pool in place to sell bonds by negotiation if necessary.
However, Watkins did point out that his division competitively sold $150 million of public education capital outlay bonds on Oct. 28, and $36.6 million of facility revenue bonds last Tuesday.
"So market conditions have improved over the last three weeks, but they remain very volatile and it's a day-to-day prospect with respect to what the conditions in the market will be," Watkins said.
Currently, the primary demand for tax-exempt bonds is coming from retail investors. To access that demand effectively may require selling bonds on a negotiated basis, said Watkins, who presented a list of firms the state would use if market conditions deteriorate.
"We will have this pre-approved group of underwriters in place so that we would be able to sell bonds and borrow money," he told the trustees. "If market conditions continue to improve, to stabilize, we may not ever need to use the negotiated method of sale in order to borrow money."
Large firms in Florida's new underwriting pool are Merrill Lynch & Co., Citi, JPMorgan, Banc of America Securities LLC, and Morgan Stanley. Mid-size firms are Raymond James & Associates Inc., Morgan Keegan & Co., and BB&T Capital Markets. Small firms are Loop Capital Markets LLC, Siebert Brandford Shank & Co., and Jackson Securities Inc. One firm providing an Internet-based platform, Fidelity Investments, may be used on some financings.
Georgia bond finance director Lee McElhannon said Thursday that his state also is considering selecting a pool of underwriters for negotiated transactions, although the state typically sells bonds competitively.
If Georgia does decide to pursue negotiated offerings, McElhannon said the state would seek proposals from firms and establish a pool like Florida has done.