News | New Mexico State Treasurer's Office

SANTA FE – New Mexico State Treasurer James B. Lewis announced today that he has implemented a plan intended to protect the deposits of participants in the New MexiGROW Local Government Investment Pool (LGIP) that have been impacted by the Reserve Primary money market fund’s decision last week to modify future distributions.

Standard & Poor’s Ratings Services (S&P), which provides the credit rating for the LGIP, released a statement today saying that as a result of Treasurer Lewis’s plan the LGIP will continue to have a ‘AAAm’ rating. The statement released by S&P is available on the State Treasurer’s Office’s web site at www.stonm.org.

The Reserve Primary Fund announced on February 26, 2009, that it was initially setting aside $3.5 billion for the purpose of anticipated and pending litigation against it. To date the Reserve Primary Fund has distributed 85 cents per share and intends to distribute proceeds to shareholders up to 91.72 cents per share, unless the Reserve Primary Fund intends to increase the amount initially set aside.

Following the Reserve Primary Fund’s announcement, Treasurer Lewis notified LGIP participants that his office had developed a plan intended to minimize the effect of the Reserve Primary Fund’s announcement. Treasurer Lewis’s announcement to LGIP participants is also available on the State Treasurer’s Office’s web site.

“As of today, we cannot predict what the losses will be as a result of the Reserve money market fund ‘breaking the buck’ on September 15, 2008, and in light of the fund’s recent decision,” Treasurer Lewis said. “We will continue to take steps that we believe will best protect LGIP participants’ holdings.”

When the Reserve Primary Fund announced its initial liquidation plan on December 3, 2008, the State Treasurer’s Office began amortizing the estimated loss against future LGIP investment earnings. The plan announced today replaces the amortization plan and includes the following elements:

o The State Treasurer’s Office is separating the investment in the Reserve Primary Fund from the LGIP portfolio. This investment will be placed into a fund named “The Reserve Contingency Fund.”

o The LGIP portfolio will continue as a money market fund. To further protect participants’ holdings, the LGIP portfolio has been divested of prime and government money market funds. Those proceeds have been reinvested in 7-day to 10-day Treasury bills and fully-collateralized bank deposits.

o The portion of current LGIP participants’ holdings that are attributable to the Reserve Primary Fund investment as of September 15, 2008, will be placed in “The Reserve Contingency Fund.”

o Any future distributions made by the Reserve Primary Fund will be placed into “The Reserve Contingency Fund” and then distributed to LGIP participants based on each participant’s pro rata share of the LGIP balance as of September 15, 2008.

As the plan is carried out over the next few weeks, participants’ withdrawals from the LGIP will be limited and participants will be notified as to how the plan will affect each of their accounts.

The State Treasurer’s Office is evaluating the new information received from the Reserve Primary Fund to determine whether there is any recourse in light of the Reserve Primary Fund’s actions.

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