Oct 12, 2006 12:58 pm US/Central
'U' May Pass On Local Firms For Stadium Contract
Minneapolis (AP) ―
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The contract -- including underwriting services for $137.3 million in bonds -- is expected to generate more than $500,000 in fees. (File)
CBS
To the dismay of three local investment banking firms, University of Minnesota officials are recommending that New York-based Lehman Bros. receive an investment contract for the new, on-campus Gophers football stadium.
The contract -- including underwriting services for $137.3 million in bonds -- is expected to generate more than $500,000 in fees.
Three local firms -- Piper Jaffray, Wells Fargo and RBC Capital Markets -- submitted a joint underwriting proposal for the contract. Now, they are complaining, and a Wells Fargo official said the decision to choose Lehman Bros. was embarrassing to the companies.
A report outlining the university's reasoning is not yet public. But school officials said Lehman Bros. met eight criteria, including cost and a goal of protecting the school's credit rating.
"This was a fair, above-board process," said Richard Pfutzenreuter, the university's chief financial officer. "I think it's (a) real sad thing for them to be saying those things."
The three bond houses say they have helped the university philanthropically. RBC Capital Markets said it had given $100,000 to the university's law school over a recent three-year period, sponsored philanthropic events for the men's and women's basketball teams and presented clinics taught by the school's coaching staff.
Piper Jaffray, according to the bid proposal, endowed a professor of finance chair at the university's Carlson School of Management, contributed $1 million, and served on an advisory board of the school's Carlson Fund Enterprise.
The estimated $528,000 in fees the consortium would gain from the contract is not a large payment in investment banking, but Dick Miller of Wells Fargo said it had more to do with prestige. Miller, a senior vice president of public finance, said the university didn't interview the consortium. The university said the firms did not make a list of finalists.
"This process, it seems to be flawed," said Miller, who said the three firms together typically sell more bonds to Minnesota clients than their competitors. "It's not the way business is normally conducted in Minnesota."
Pfutzenreuter disputed Miller's claim that the university had an unusually close relationship with Lehman Bros., saying the university has done business with J.P. Morgan, Merrill Lynch and other firms.
"I don't sit and look at a scorecard as to who gets awarded contracts," he said.
Meanwhile, proposals for financial underwriting services for the new Twins stadium are not being sought, but several bond firms are already lobbying Hennepin County. The county is expected to issue at least $350 million in bonds for the stadium.
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Memorial Stadium was the home of Minnesota Golden Gophers football from 1924 until 1981.
(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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