News & Events

Grant Street Group Hosts Huge Internet Auctions for Massachusetts $1.2 Billion GIC Auction and $164 Million Interest Rate Swap

In a first-of-its-kind transaction, the Commonwealth of Massachusetts conducted two internet auctions back-to-back today: a $1.2 Billion GIC auction and a $164 Million, 15-year floating-to-fixed interest rate swap. Both transactions are related to the Commonwealth’s sale of GO Bonds. Grant Street Group served as Bidding Agent for the GIC and Auction Agent in the swap transaction, soliciting bidder participation and supplying the internet auction website, www.BidMass.com, and patented methodology used by the State Treasurer. Swap Financial Group served as the Commonwealth’s Swap Advisor.

Seven firms submitted bids in the $164 Million swap auction. Merrill Lynch submitted the best bid at a rate of 3.9420% and was awarded two-thirds of the total notional swap amount and Bear Stearns, with the second best bid (3.9450%), was awarded one-third at the same rate as the best bid (3.9420%). Other swap bidders, in rank order, included Lehman Brothers, UBS, JPMorgan, Royal Bank of Canada and Goldman Sachs. The swap auction format was sealed-bid, which prevents bidders from seeing their status relative to other bidders during the bidding period.

Eleven firms submitted bids for $1.2 Billion of uncollateralized investment agreements in an open auction that enabled bidders to see their status (i.e., “Leader” or “Not Leader”) relative to other bidders during the bidding period. After intense bidding that triggered extensions of the bidding period 3 times, contracts were awarded to Wells Fargo, Pallas Capital, Calyon and Citigroup each in amounts of $300 million.

Today’s transactions mark the 17th and 18th time the Massachusetts State Treasurer, Timothy P. Cahill, has used his private label BidMass auction website. In addition to hosting GIC and swap auctions on the site, the Treasurer conducts bond and note auctions and CD solicitations using the site.

Grant Street’s John McCarthy commented after the sale: “Today’s Massachusetts auctions were not only the largest of the 443 (totaling $18 Billion) we have done in the past 10 years, they were also among the most competitive. For example, it is unusual to have as many as 11 bidders actively participating in a single GIC solicitation, which is what we had today.”