The Massachusetts Turnpike Authority yesterday announced that State Street Bank pulled its offer to provide a letter of credit on its planned $127 million variable-rate deal, a move that forces MassPike officials to search for an alternative strategy in dealing with a problematic swaption.

The authority may turn to other banks to supply a letter of credit enhancement on the floating-rate bonds, but it is also reviewing all options, including not selling the $127 million of debt. MassPike officials said State Street withdrew its LOC on the deal due to current market volatility and credit constraints from the fallout of the subprime housing market.

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