LOS ANGELES -- Morgan Stanley & Co. invited minority- and women-owned firms to participate in a selling group following its winning stand-alone bid yesterday for $144.79 million of California general obligation refunding bonds.

Andrew Rowley, managing director and manager of Morgan Stanley's syndication, said 51 targeted business enterprise firms were invited. Twenty had accepted and nine had turned down the opportunity as of 3 p.m. eastern daylight time yesterday.

Rowley said the invitations were wired about 30 minutes after the state announced Morgan Stanley's winning bid -- with a true interest cost of 5.2453% -- for the various-purpose GO refunding bonds. Five bids were submitted, the largest number on a state GO bond issue in recent memory, said Hal Geiogue, assistant state treasurer.

Women-owned Artemis Capital Group Inc. declined the Morgan Stanley invitation to participate in the selling group because it was already a member of a Bank of America syndicate, the runner-up in the bidding, said Aimee S. Brown, a principal of Artemis.

"We feel that it would be cross-committing," she said, explaining that the Morgan Stanley proposal was sprung on us, and, whether legal or not," her firm did not feel comfortable pursuing the opportunity without first exploring "internal policies."

Brown added that "it is unusual, to my knowledge, to be invited in after the fact."

By contrast, Charles A. Bell Securities Corp. did agree to participate, said Chris St. James, a managing director of the minority-owned firm based in San Francisco.

"We're a selling group member as of about five minutes ago," St. James said in a brief telephone conversation yesterday morning. "We're often asked at the last minute to be in selling groups, and we always like to do business with the state of California."

Responding to Artemis' concerns, Geiogue said there "is no legal problem" for firms in other syndicate selling groups to join Morgan Stanley's selling group. "You just can't bid in two syndicates at once," he said.

Geiogue said Morgan Stanley's invitation to targeted-business enterprises is "commendable." Although California law targets 15% participation by, minority firms, 5% by women, en, and 3% by disabled veterans in state negotiated issues, "in competitive bidding for state GO sales we have not seen a lot of evidence that firms meet the goals," Geiogue added.

While saying "I am trying to accomplish [California's] objective" of providing business to minority and women firms, Rowley could not predict whether he believed firms who participate would meet the percentage goals outlined in the state's negotiated underwriting policy.

"I was offering them an opportunity to take bonds down and sell them to their accounts," Rowley said. "If they chose not to participate, that is fine. That way they don't have risk or liability," unlike co-managers who are chosen for their ability to assume liability for purchasing and reoffering state bonds for sale to the public.

Morgan Stanley originally was in the Bank of America syndicate, but withdrew and decided to pursue a bid on its own for the GO refunding bonds, which originally had been targeted as a $250 million deal but was downsized to $144.79 million because of a glut of California municipal bonds on the market.

Geiogue said the deal should provide the state "better than" 3% present value savings and the state is "very pleased with the results." He said the only wrinkle was a decision to disqualify a bid by a Prudential Securities Inc. syndicate.

The Prudential syndicate was disqualified because -- instead of listing interest rates in ascending order in the year 2003, as required in the bid form -- Prudential began the ascending list one year later, in 2004. That error "changed the TIC and caused a distortion in the data," Geiogue said. "They weren't close to winning it anyway, but we thought it was important to disqualify the bid because we thought bidders [should] submit bids in the form required in the official statement."

Also bidding were Lehman Brothers and Bear, Steams & Co. syndicates.

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