Municipal bond buyers are getting their first taste of stranded cost ABS, as the state of Connecticut is in the market with the first stranded cost securitization marketed to municipal bond buyers. The bonds, the proceeds for which are being used to fill a projected budget deficit, achieved tax-exempt status - thanks to funding utilities payments toward state-sponsored conservation spending, sources said.

"This act of legislation was implemented specifically to impose a brand-new non-recourse charge on ratepayers," said a source at Lehman Brothers. The law is a response to the looming deficit. Rather than opting to reduce the conservation expenditures, this new charge offsets that possible reduction.

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