CHICAGO - Wisconsin hopes in the coming months to place nearly $200 million of its nearly $1 billion of auction-rate securities that failed to attract buyers last week when the state sought to convert its ARS to fixed- and floating-rate index bonds, the state's capital finance director said yesterday.

Given the flood of auction-rate restructurings hitting the market, Frank Hoadley said he was generally pleased "that we have taken the uncertainty on all but about $200 million out." The state is exploring several options that include a private placement and discussions with buyers on the deal about purchasing additional pieces of debt. A competitive sale is also under consideration.

Officials started the restructuring process last month as they saw auctions fail and rates rise as investors began to shun the products amid credit concerns, and as investment banks withdrew their support as they too worried about liquidity amid massive losses over exposure to subprime securities.

The maximum rate that the securities could be set at under terms of the transaction was 15%. Series auctioned last month and earlier this month had been set at rates between 7% and 10%. The original debt was sold in nine tranches that are auctioned every 28 days.

The state sought to exit the auction-rate market with the restructuring while at the same time maintaining flexibility to refund the bonds in future years as bullet maturities in the original amortization schedule come due. The bonds sold in 2003 to wipe out the state's unfunded pension-related liabilities.

The new bonds were heavily marketed to foreign buyers and Hoadley said it was European banks such as Dexia Group and Depfa Bank PLC that specialize in municipal products that bought the seven of the nine auction-rate tranches that sold.

About $500 million sold with a fixed rate, paying an average coupon of about 5.05% with a true interest cost closer to 6%. The state will effectively pay a rate of about 6.67% on the floating-rate bonds when swap agreements that remain in place from the original transaction are factored into the rates.

Citi ran the books on the transaction with Bear, Stearns & Co., Depfa First Albany Securities LLC, Morgan Stanley, and Siebert Brandford Shank & Co. as co-seniors, and another six firms rounding out the syndicate as co-managers. The two tranches that remain will be auctioned every 14 days beginning on Monday.

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