Over the next several months, the State of New York Municipal Bond Bank Agency (MBBA), a public benefit corporation for the State of New York, will begin purchasing tax lien receivables from the various municipalities, ramping up for its initial securitization. The MBBA has already begun discussions with several New York counties and cities.

Though the first transaction could conceivably come to market before yearend, it is conservatively budgeted for spring 2003, sources said.

Financial advisor Lepercq LLC was chosen earlier this year by the MBBA to assist in structuring the transactions, following a request for proposals (RFP), issued in November 2001. Lepercq is also the tax lien securitization advisor to New York City, which has had an established securitization program since 1996. NYC is expected to price a $100 million to $200 million deal via Morgan Stanley in June. "The [MBBA securitization] is really in the New York City format, but you'll have several participating municipalities," said Stephen Cate, a managing director and partner at Lepercq.

The MBBA's delinquent tax lien securitization initiative was approved in a bill signed by Gov. George Pataki in August 2000, but has not been a major focus until recently. Through the program, municipalities will sell tax lien receivables to the MBBA on a voluntary basis. When the portfolio reaches critical mass (as much as $150 million), it will be taken to market. "What we're doing right now is going out and meeting with different municipalities both at the county level, and also the cities and villages," said Tracy Oats, of the MBBA. "We have a couple of parties that we think are close to deciding to participate, but we need a few more. In an ideal world, we would have the participants identified by mid summer."

Over the next few years, the MBBA hopes to be at least a per-annum issuer. Part of this effort involves educating and familiarizing the various municipalities, as well as Wall Street, with the MBBA, which is affiliated with the Housing Finance Agency (HFA) and SONYMA, both of which are established names in the housing market.

Lepercq is involved in several of New York's municipal securitization initiatives, including a $400 million-plus portfolio of "affordable housing" mortgages issued through the Department of Housing Preservation and Development (HPD). The transaction will be securitized in a program through the Housing Development Corp., Lepercq's Cate said.

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