Mainsail II Receiver Appointed, Lemoine excludes Merrill Lynch from Bond deals

April 4, 2008

(AUGUSTA, MAINE) – Receivers have been appointed to manage the wind down of Mainsail II, the company that defaulted on its debt to the State last August. “The next market resolution phase for the State’s Mainsail II investment is finally underway,” noted State Treasurer David Lemoine, as news came today that KPMG would manage the wind down. “This development appears to at last establish clear authority to find refinancing solutions that can be supported by secured debt-holders like Maine,” he added.

Lemoine also noted that the Maine Attorney General’s Office continues its extensive regulatory review of Merrill Lynch’s actions as broker for the Mainsail commercial paper investment.

Treasurer Lemoine further announced today that Merrill Lynch has been excluded as a co-manager of the State’s general obligation bond sale planned for late May, and that the brokerage firm will be barred from participation in the selling group for those bonds. “Until the Mainsail II matter is fixed and I am satisfied that the Merrill Lynch brokerage culture is trustworthy, this office will not bring Merrill Lynch into any of our bond deals,” said Lemoine. Maine expects to sell nearly $120 million in general obligation bonds in May.

Mainsail II was a commercial paper investment made last August 8th through a broker with Merrill Lynch. The State committed $19,930,361 and expected to be repaid $20 million 23 days later. At the time of the investment, Mainsail II carried the highest credit ratings from S&P and Moody’s. Twelve days into the 23 day investment the company’s assets were frozen.

Contact: David Lemoine, State Treasurer, (207) 624-7477