An investment pool run by the Florida state government has seen a wave of withdrawals over the past two weeks as word has spread that the money-market fund contains more than $700 million of defaulted debt.
Bloomberg.com reports that the Orange County School Board withdrew $388 million from the pool this week, following the lead of other local governments that pulled funds. In total, local governments and school districts have pulled $8 billion from the pool since Nov. 14, when the State Board of Administration reported its holdings of downgraded debt to Gov. Charlie Crist.
The agency's board of trustees will meet on Dec. 4 to discuss the possiblity of acquiring credit protection for about $1.5 billion of investments from issuers Axon Financial, KKR Atlantic Funding Trust, KKR Pacific Funding Trust, Ottimo Funding and Countrywide Bank FSB.
About $19 billion remains in the pool, which is among the $2.4 billion of short-term investments managed by the State Board of Administration, almost 6% of which consists of asset-backed commercial paper. Lehman Brothers Holdings Inc. sold the state most of the now-default-rated paper, according to the report.
