Citigroup Agrees to Purchase Auction Rate Securities from Massachusetts Water Pollution Abatement Trust
Attorney General commends Citigroup’s cooperation in Trust investment review
BOSTON – Today, Attorney General Martha Coakley’s Office announced that Citigroup has agreed to purchase from the Massachusetts Water Pollution Abatement Trust (MWPAT) auction rate securities that it had previously been sold to the Trust in the winter of 2007-2008. The Attorney General’s Office has been conducting an ongoing review of state investments in the auction rate securities market, and worked with Citigroup to arrange this result.
“Our primary goal in these reviews is to obtain results promptly for the Massachusetts trusts, agencies and municipalities that made investments,” said Attorney General Coakley. “We commend Citigroup for its cooperation in our review of this matter.” MWPAT will receive $20 Million from Citigroup’s purchase. The Attorney General’s Office will continue to review the Trust’s investments, and determine whether further action is needed.
Francy Ronayne, a spokesperson for MWPAT, which provides funding to towns and cities for sewer and water related repairs and improvements, commented, “We are satisfied with this result and commend the Attorney General and Citigroup for their work in this matter.”
An auction rate security is a debt instrument, such as a bond or preferred stock, for which the interest rate or dividend is periodically reset through an auction mechanism. Although these securities have long-term maturities, they historically have been offered for sale at weekly or monthly auctions. However, in early 2008, the market dried up and the auctions experienced widespread failures. When an auction fails, liquidity disappears from the market as it becomes difficult to dispose of such securities. Many such securities have been written down to reflect their reduced market value. Auction rate security investments have been frozen since early this year due to lack of market liquidity.
This matter is being handled by Attorney General Coakley’s Insurance and Financial Services Division.