CHICAGO - Metropolitan Pier and Exposition Authority officials say they are optimistic that today's scheduled sale of $196 million of new-money and refunding bonds will result in 30% participation by minority and woman-owned firms.

"Twenty-five and five [percent] is not a goal, it's a done deal," said Jim Bolin, chairman of the Chicago-based authority's finance committee.

The authority came under fire last year for failing to meet the goal of 25% minority firms and 5% woman-owned firms for an $879 million revenue bond issue it sold in December 1992.

To ensure that goal is met for the new bond issue, Smith Barney Shearson, the bookrunner for the sale, set up rules giving net designated orders the highest priority and requiring institutional orders to designate at least three firms, including one minority or woman-owned firm, to receive sales commission.

Each firm designated will receive a minimum of 10% or a maximum of 50% of the order. In addition, a portion of sales commissions will be pooled and allocated to minority and woman-owned firms on the basis of performance.

"Our goal is to get [the authority] the best rate possible and assure a fair and equitable sharing of all revenues by underwriters," said R. Ray Kljajic, a managing director at Smith Barney.

A special "super-co-manager" tier of two minority firms and one woman-owned firm was also set up to reward firms for their performance in the 1992 bond issue, Kljajic said.

Those firms, M.R. Beal & Co., Reinoso & Co., and Smith Mitchell Investment Group In., were given a higher underwriters' liability of 3.5%. The remaining 24 co-managers were given liabilities of 2.83% or 1.5%. Both Smith Barney and Donaldson, Lufkin & Jenrette Securities Corp., the co-senior manager, have liabilities of 18.02%. About $10 million of the term bonds will be allocated on the basis of liability.

For the new bond issue, which refunds about $140 million of the 1992 bonds, the authority selected the same underwriting team with a few changes. Smith Barney and Donaldson Lufkin were appointed co-senior managers again, and many of the 23 co-managers from the 1992 issue were included in the new issue. The number of minority and woman-owned firms was increased to 16 from 10 in the 1992 deal.

One co-manager questioned the elimination of group net orders, saying that not giving the orders the highest priority could favor senior managers.

Officials reached at some of the other co-manager firms said they were happy with the bond allocation plan for the new issue.

Carolie R. Smith, president of Smith Mitchell Investment Group, said it was important to "communicate and get out the rule ahead of time.

"They are providing a policy that will allow meaningful participation of all co-managers," Smith said.

However, some institutional investors were not pleased.

"When you come to borrow money, you don't tell the banker the terms you'll borrow the money at," said Gregory Harrington, an executive vice president and director of trading and research at the Franklin/Templeton Group.

Harrington said while the firm does business with many minority and woman-owned firms, the firm's policy is not to let issuers dictate sales compensation.

Controversy over minority and woman-owned firm participation grew out the December 1992 bond issue to finance the expansion of the McCormick Place convention center in Chicago. The issue, which marked the single largest bond issue in Illinois history, left some of the 23 co-managers dissatisfied with the way they were treated.

An executive at one minority-owned co-manager firm claimed that Smith Barney and Donaldson Lufkin took advantage of the order designation process to get more bonds for themselves. In fact, the authority reported that minority and woman-owned firms only received about 16.6% of the $7.6 million of fees paid in the issue.

Complaints that the authority fell far short of its 30% participation goal led Illinois State Rep. Monique Davis, D-Chicago, to introduce a bill last year that would cut off state sales tax revenue security for the authority's bond issue if the McCormick Place expansion project failed by yearend to meet the goal in all aspects of the project.

The bill failed to muster enough support and died in the Illinois House.

Davis said she has not been in touch with authority officials. However, she made it clear that she would be watching how minority and woman-owned firms are treated in the sale.

"We don't want to wait until next time," she said. "This is the next time [the authority] had spoken about."

John Schmidt, the authority's chairman, said he is "adamant" about meeting the 30% goal in this sale, adding that he felt it was possible given that the deal is much smaller than the one in 1992.

"We told the senior managers that we absolutely had to meet the goal, and whatever needed to be done differently to meet it had to be done," Schmidt said.

The bond issue includes about $90 million of current interest bonds, $62 million of capital appreciation bonds, $10 million of deferred interest bonds, and $29 million of Smith Barney's floaters and inverse floaters, called Auction and Inverse Rate Securities.

Financial Guaranty Insurance Co. will insure the 2029 maturity of the capital appreciation bonds. Municipal Bond Investors Assurance Corp. will insure the rest of the bonds.

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