CHICAGO - Underwriters interested in working on possible negotiated sales of general obligation issues for Minnesota over the next two years have until July 28 to submit their proposals to the state.

The RFP marks a first for the state involving its GO issues. Its statutes previously required that GOs be sold competitively, but debt manager Kathy Kardell won authority from the Legislature earlier this year to use the negotiated method over the course of the fiscal 2010-11 biennium that runs through June 30, 2011, due to market turmoil.

Minnesota will put together a senior managers-qualified list and a co-managers list. It expects to sell a total of $700 million of new-money bonds this year to fund projects authorized in capital budgets approved this year and in past years. It may also sell refunding bonds.

The RFP documents ask potential underwriters to submit their experience working on Build America Bonds transactions and to provide an analysis regarding the tradeoffs of using a traditional municipal call and make-whole call provisions. The state also seeks information on how its debt should be marketed, given the current economic and financial market conditions.

The state has $4.6 billion of outstanding GOs that are rated Aa1 by Moody's Investors Service and AAA by Fitch Ratings and Standard & Poor's. Fitch assigns a negative outlook to the credit. The state's GOs must be fixed rate and are limited to a 20-year maturity.

As part of the bonding bill approved this year, the Legislature approved and Gov. Tim Pawlenty signed a measure allowing the state to sell new-money and refunding GOs via negotiation. The Legislature approved a nearly $300 million bonding bill, but the governor vetoed about $82 million from it.

Although it is a rare issuer, Minnesota directly felt the impact of the market turmoil last fall. As Kardell's team was readying a $440 million transaction in the fall, the market froze following Lehman Brothers' bankruptcy. Officials delayed the transaction and watched for other large competitive deals to hit the market first, but they were forced to put off the deal until earlier this year as it awaited the formal November revenue forecast.

Lawmakers also approved rule changes that would allow the state to tap the federal government's taxable BAB program.

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