ATLANTA - Over strong protests from state Treasurer Mary Landrieu, Louisiana's Bond Commission has named Stephens Inc. lead manager for an upcoming $75 million sports stadium bond issue.
Landrieu charged that the commission's choice last Thursday of Little Rock-based Stephens to head the Louisiana Stadium and Exposition District deal was ill-advised because it circumvented long-established underwriter selection procedures. For the same reason, the treasurer also opposed the naming of Prudential Securities Inc. and Apex Securities Inc. Thursday as co-senior managers for the transaction. Apex is a minority-owned firm based in Houston.
The deal is the first major Louisiana transaction landed by Stephens since it hired two senior public finance bankers from New Orleans-based Howard Weil, Labouisse, Friedrichs Inc. two and a half week ago. The bankers, David Landry and Mark Hattier, will staff an office Stephens plans to open in New Orleans next month.
Stephens is also no stranger to the stadium district. It was the lead manager on the authority's first bond issue to fund budding of the Superdome Stadium in New Orleans, a $113 million offering sold in 1971.
"If the Bond Commission is going to disregard the details of offers made by competing firms and the weights assigned through the solicitation for offers process, and award contracts based on some other reason than the results of a fair and open competition, then we don't need to go through the charade of a selection process," Landrieu said in a statement Friday.
Landrieu, however, did not allege any illegality, nor did she fault the price set for underwriting services on the deal or the ability of the three firms to execute the borrowing.
"This is not at all to be construed as to say that the firms that were ultimately chosen are not qualified to do the work and that the price achieved is not competitive," she wrote, "but it is to say that there seems to be based on the written record of the meetings, no way to justify their selection based on the criteria established by the Bond Commission and its own subcommittee."
A gross spread of $4.27 per bond will be charged on the deal, with percentages set at 40% for Stephens, 20% for Prudential, and 10% for Apex.
The stadium authority plans to sell a $75 million tax-exempt issue in February, with $56 million of the debt to refund bonds originally sold to build the Louisiana Superdome in New Orleans and $19 million in new money to cover design fees for a slew of new sports projects.
At the Bond Commission meeting Thursday, Landrieu was the only member among 13 present to vote against a recommendation from the commission's fee subcommittee on Dec. 7 that the three firms be hired. Landrieu also was the only member of the subcommittee, which voted 9 to 1 in favor of the trio, to oppose hiring the firms.
A commission member, state Rep. Steve Theriot, D-Marrero, said in an interview Friday that he voted to hire Stephens "because I felt they were well qualified and because they had been the firm to step up to the plate and underwrite bonds for the Superdome when others wouldn't."
William Bathea, the Stephens senior vice president who manages the firm's public finance department, said yesterday that "we respect the treasurer's opinion but believe that we were well qualified to be selected for the financing."
The subcommittee's staff on Nov. 30 scored the written proposal submitted by Stephens at 69.21 points, or eighth out of 13 candidates, according to commission records. Under this scoring, which evaluated both proposed price and deal structure, Prudential ranked second, at 85.63 points, and Apex 12th, at 61.12. Smith Barney Shearson ranked first with 87.44 points.
At the Dec. 7 meeting of the fee subcommittee, oral interviews with all 13 firms were conducted, with each competitor given 10 minutes to make a presentation and 10 minutes to answer questions.
Theriot attributed the discrepancy between the numerical score of the staff and the final selection following the interviews as due to a "subjective factor that is built into the process."
According to a copy of the proposal submitted by Stephens to the bond commission, the firm said that one of the reasons it hired the Baton Rouge, La.-based law firm of McCollister & Cleary was "to obtain the consulting services of Theodore (Ted) L. Jones (of counsel to the McCollister firm) on federal legislative issue and state matters which are of interest to the firm."
Jones is a well-known lobbyist in Louisiana who has served as the state's lobbyist in Washington, D.C. Bathea, Stephens' public finance manager, said that Jones was not hired to lobby for the firm's selection in the stadium authority deal but rather to represent the firm in Washington.
Earlier this year, Louisiana's legislature authorized the Stadium & Exposition District to sell up to $215 million of bonds to refund its outstanding debt and finance various sports-related construction projects in the New Orleans area. The projects include renovations of the Superdome and construction of a 20,000-seat sports arena behind the Superdome.
The legislation permits issuance of up to $155 million in new-money bonds by the authority and $60 million in refunding debt. It stipulates that the 4% occupancy tax charged by Orleans and Jefferson parishes be the sole source of coverage for interest and principal on the bonds.
The stadium authority last sold bonds in 1976, when it issued $134 million of revenue debt to refund bonds sold to finance construction of the Superdome, which was completed in 1975.