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MuniAuction Gets New Investors; Plans to Expand Into GIC Bidding

From the Bond Buyer – Atlanta, GA (May 18, 1999)

by Robert Whalen

Even as the ink dried on a second private-label agreement with a financial advisory firm, MuniAuction Inc. was closing a separate deal with a Washington, D.C.-based investment group — selling a minority stake in the company for $6 million.

The cash fronted by the Carlyle Group — which manages approximately $3.5 billion of capital — will allow the Internet-based auction site to further its scope of services, according to MuniAuction president Myles Harrington.

“Now we’ll have the capital that we need to expand our activities … well beyond the core product,” Harrington said.

The latest development to be offered, he said, will be the electronic auction of guaranteed investment contracts worth roughly $500 million. Harrington declined to identify the issuer but said the GICs will likely be bid upon within the next 30 days.

While some in the market may have expected MuniAuction to wane in the presence of competing services offered by Bloomberg LP and Thomson Financial, Harrington’s small business has thrived.

For example, Chicago-based financial adviser Speer Financial Inc. last week became the second such firm to launch its own auction site thanks to MuniAuction’s technology.

According to David Phillips, a senior vice president with Speer, his firm is going to “test” the product with a triad of Illinois deals coming to market within the next month.

Phillips said a bank qualified deal for the Glenview Park District selling Thursday will mark the first time an Illinois issuer uses an electronic sale. The private-label site — at www.speerauction.com — will similarly sell a small St. Charles Park District deal June 8, as well as a $26 million school sale for the Batavia School District.

“We’ll dip our toe in the water, but not try to present options that are onerous — or not well-received — by the market. We’re looking to offer new technology, not new methodology,” Phillips said, emphasizing that the bonds will also be sold through the traditional all-or-none format.

Phillips said his firm is exploring electronic bidding as a natural progression of the business. A financial adviser’s decision to sign a private-label agreement raises the benchmark for the competition was not a concern, Phillips added. A private label allows a financial adviser to personalize a bond auction Website.

Harrington said the latest developments have made the prospect of offering stock a very attractive possibility.

“Now that we have some professional money, the likelihood of such a thing is pretty high,” he said.