New York is considering converting all or some of its $3.5 billion of state-supported debt in auction-rate mode into variable rate demand bonds, according to a request for proposals for liquidity and letter of credit facilities released Friday.

The RFP was released at the end of a week marked by the failure of more than $1 billion of auctions of state-back debt issued directly by the state or through public authorities. The state is also considering placing a letter of credit on up to $1.2 billion of existing VRDBs.

The state would prioritize its use of liquidity and letter of credit facilities based on those bonds' exposure insurance provided by Ambac Assurance Corp., CIFG Assurance North America Inc., Financial Guaranty Insurance Co. , XL Capital Assurance and MBIA Insurance Corp. because they have been downgraded or are at risk of being downgraded and other considerations. The state will also consider market conditions and all-in cost associated with the conversions when prioritizing the use of the facilities which would include direct pay letters of credit and liquidity facilities.

The state is not seeking LOC proposals for its general obligation, Local Government Assistance Corp. or personal income tax bonds. The state has about $50 billion of total debt outstanding. Responses to the RFP are due on Feb. 22.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.