From The Bond Buyer - Harrisburg, PA (March 31, 1999)
by Ivan Cintron
Public Financial Management Inc. completed the first competitive bond sale over its new private-label Website last Thursday, attracting several out- of-state bidders, according to sources involved with the deal.
The sale of $10 million of general obligation bonds by Monroeville, Pa., through the site, located at www.PFMauction.com and powered by MuniAuction Inc. software, attracted 11 underwriters, who submitted 55 bids for the issue's 13 maturities. Out of these bids, 11 were all-or-none and 44 were for individual maturities. Maturity-by-maturity bidding is a hallmark of Pittsburgh-based MuniAuction's electronic system.
Nike Securities, based in Lisle, Ill., submitted the winning bid, capturing the entire issue with a true interest cost of 4.3452%. Pittsburgh-based Mellon Bank submitted the cover bid with a TIC of 4.3478%.
Parties involved with the sale were upbeat about the results.
"It went very well," said Brett Matteo, a managing director in PFM's Harrisburg, Pa., office.
"In theory, the more bidders, the more competition, the lower the TIC. The more competition, the better it is for our clients," says PFM's Brett Matteo.
"One of the definite advantages of this format is that we can get the bids from the typical competitors -- in this case, Pennsylvania firms," said David Hasenkopf, a marketing official with MuniAuction. "At the same time, it was a much easier way for firms outside the immediate region to participate."
Hasenkopf also pointed out that the fact the sale was conducted on PFM's site helped the Monroeville bonds lure underwriters from outside the state.
"I think that it did help. PFM carries a brand name that's known nationally," he said. "Partnering with them definitely adds to the breadth of the participation."
But Matteo contended that despite the electronic bidding aspect, this sale had about the same number of dealers from the region and outside the state vying for the bonds as in other, similar Pennsylvania competitive deals.
He added, however, that as more issuers use the site, a larger number of firms could compete for deals sold by PFM's clients through its site.
"That's certainly our hope, that's our intent," he said. "In theory, the more bidders, the more competition, the lower the TIC. The more competition, the better it is for our clients."
In addition to Nike Securities, some of the other out-of-state firms participating in the auction were: Corby Northbridge Securities Inc. in Boston; Griffin, Kubik, Stephens & Thompson Inc. in Chicago; State Street Bank & Trust in Boston; and Zions Bank in Salt Lake City.
Underwriters said the sale process for the most part went smoothly.
"My initial impression of the site was that it was so user-friendly and it was so easy that I thought I must be doing something incorrect," joked Francine Russell, vice president in the underwriting department of Nike Securities.
Russell said using the site was quick and simple, and there were no delays in getting information about the bonds or submitting bids.
MuniAuction and a couple of financial advisers have confirmed the company is in discussions to establish similar sites with other FAs.