New York’s Metropolitan Transportation Authority today will recommend Lamont Financial Services Corp. and Swap Financial Group LLC to replace Goldman, Sachs & Co. as its financial and swap advisers, according to materials posted on the MTA’s website.
Goldman had served as financial adviser since 2000 but it was reported earlier last week that the firm would be dropped.
MTA spokesman Aaron Donovan said the decision to drop Goldman was not related to fraud charges brought against the firm last month by the Securities and Exchange Commission, which alleged Goldman defrauded investors in a collateralized debt obligation transaction linked to subprime mortgages.
The new firms’ contracts, subject to committee and board approval this week, would run for three years with the possibility of two one-year renewals after that.
The MTA, which operates transit lines in the New York City metro region, selected the two firms from among 15 responses to a request for proposals issued June 15, 2009. Eight finalist were chosen the following month for oral interviews.
Goldman, which had served as both financial and swap adviser, was among the firms that submitted proposals. A spokesman for Goldman declined to comment.
The MTA’s selection committee decided to use separate firms to advise it on debt financing and swaps due to “significant changes in the capital markets resulting from the market dislocation beginning in late 2008,” according to board materials.
If approved, Swap Financial will provide advice on timing, structure, terms and conditions of the MTA’s derivative portfolio. The authority’s swaps as of March 31 had a notional value of $4.23 billion and negative fair market value that would cost it $310.2 million if they were all terminated. Lamont would advise the MTA on its bond issuance.
The selections were based on “the quality of the written proposals, the oral interviews, the experience of the key members of the respective advisory teams, and the updated price proposals,” according to finance committee meeting materials.
Lamont proposed a $0.27 fee per $1,000 of bonds issued with an annual compensation cap of $635,000. Swap Financial proposed a $5,000 monthly retainer and hourly professional service fees that range from $200 to $600 for new transactions. Swap Financial, which is based in South Orange, N.J., agreed to reduce its fees by 10% for the first year of the contract.
The Wayne, N.J.-based Lamont ranked 11th nationally among financial adviser firms on municipal debt in 2009, working on 39 deals totaling $5.55 billion, according to Thomson Reuters.
The MTA plans to sell $1.57 billion of new money and refunding bonds in the remainder of 2010 and $1.61 billion of new-money bonds in 2011.