Local Government Investment Pool the Subject of Special Thursday SBA Meeting

At the request of Chief Financial Officer Alex Sink, a special meeting of the State Board of Administration (“SBA”) will be held Thursday, November 29, 2007. 

The purpose of the meeting is to discuss the local government investment pool. 

The details for this event are as follows:

Date:              November 29, 2007
Time:              11:30 a.m.
Location:        The Capitol, Cabinet Meeting Room

A member of this Firm will attend the meeting and provide a report on the proceedings.

 

Earlier today, the SBA issued the following information:

Executive Director recommends Financial Plan to protect the Local Government Investment Pool

Today, Coleman Stipanovich, the Executive Director of the State Board of Administration, announced that there will be a recommendation to the Board of Trustees to formally adopt a plan to provide investors in the Local Government Investment Pool (“Pool”) with assurance that the Pool will continue to provide safety of principal in the midst of an unprecedented absence of market liquidity.

“It is important that every investor in the Pool has an accurate understanding of the facts regarding our holdings, not misinformation” said Stipanovich. A November 28, 2007 article by Bloomberg News erroneously stated that: “The Florida pool’s $900 million of defaulted asset-backed commercial paper now amounts to almost 5 percent of its holdings.” In fact, certain Pool investments have been downgraded below purchase credit rating guidelines, but they have continued to pay principal and interest. The Pool has collected approximately $64 million in principal and interest payments since August on these downgraded investments.

At the December 4, 2007 meeting, the State Board of Administration Trustees consisting of Governor Charlie Crist, Chief Financial Officer Alex Sink, and Attorney General Bill McCollum, will consider the following recommendations to provide assurance to Pool investors:

Credit protection for the Pool against the potential for default by approximately $1.5 billion in securities from four issuers: Axon Financial, KKR Atlantic, KKR Pacific, OTTIMO Funding and Countrywide. The proposal would provide a cost-effective backstop against the risk of any of these securities fail to return par.

Commitment to obtain a AAAm rating from Standard and Poor’s on the Pool, including adopting more conservative investment guidelines and establishing an external Pool advisory council.

Continued restructuring of the Pool investments to become more liquid and conservative. The Pool has not made any purchases of asset backed commercial paper in November and expects the total asset backed exposure of the Pool to be under 15 percent by the end of 2007. New risk controls with respect to sector exposure will be adopted.

Building a larger reserve fund to protect the Pool against future episodes of market illiquidity.

Improvements in the investment infrastructure supporting the Pool, including daily pricing, performance measurement and risk analytics.
 

About the SBA:

The State Board of Administration of Florida (SBA) manages approximately $190 billion in assets, including the $136 billion Florida Retirement System (FRS) Defined Benefit Plan. The FRS Defined Benefit plan is the fifth largest public pension fund in the country. The FRS consists of approximately 1.1 million active participants and retirees. For additional information, please visit www.sbafla.com.   

 

 

Should you have any questions or comments, please do not hesitate to contact this office.