CHICAGO - The Illinois State Toll Highway Authority last week remarketed $700 million of variable-rate demand bonds with a revised liquidity policy after shedding an insurance policy from XL Capital Assurance Inc. that prompted a spike in interest rates and a failed remarketing.

The deal's struggles during its weekly remarketing cycles were prompted by investor concerns over the loss of liquidity should XLCA face further downgrades. The authority's timing proved astute given Fitch Ratings' downgrade of XLCA's insurer financial strength rating to junk status Wednesday.

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