Wisconsin may soon refine the underwriting team it chose last year to manage a $1.7 billion tobacco bond restructuring amid dramatic developments in the municipal industry and at investment banks stemming from the subprime mortgage market collapse and ensuing credit crunch.

Wisconsin last fall named a team with Bear, Stearns & Co. as its book-runner and Citi, Goldman, Sachs & Co., Loop Capital Markets LLC, and Siebert Brandford Shank & Co. as co-senior managers, with a second tier of co-seniors to include JPMorgan, Lehman Brothers, Merrill Lynch & Co., Morgan Stanley and UBS Securities LLC. Another 17 firms were named as co-managers.

Bear Stearns is being absorbed by JPMorgan and UBS recently announced its municipal group was up for sale and faces closure without a buyer. Bear’s top tobacco banker, Kym Arnone, left for Lehman Brothers earlier this year.

Capital finance director Frank Hoadley said last week that Wisconsin would soon issue a limited request for proposals from firms. “We will ask everyone to restate their qualifications,” he said. “A lot of people are moving chairs. A lot of people are losing their chairs.”

The state included in its current budget a plan to restructure the roughly $1.4 billion that remains outstanding from its 2002 tobacco issue, which is secured by Wisconsin’s share of payments under the 1998 national settlement between most states and the major tobacco companies. The deal has been on hold as interest rates rose over the last year.

Under legislation recently approved by the Legislature and signed by Gov. Jim Doyle, the state will put an annual appropriation behind the restructured bonds, which will lower its likely interest rates and help kick-start the deal. The legislation calls for the state to use roughly $150 million in upfront savings to help wipe out a $527 million budget deficit. Officials also expect to generate at least $50 million in annual savings to establish an endowment to support health care and antismoking programs.

Wisconsin’s current ratings are AA-minus by Fitch Ratings and Standard & Poor’s and Aa3 with a negative outlook from Moody’s Investors Service. The state’s next deal coming up is likely a roughly $800 million cash-flow note issue set to competitively price in June.

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