Underwriters Pressure Issuers To Redeem Auction Rate Securities

By John Carney

Across Wall Street, brokers are pressuring closed-end mutual funds to redeem their auction rate preferred securities, hoping to shift the cost of the market meltdown to the issuers before regulators and others forces those who sold the securities to make investors whole.
Yesterday we mentioned that Merrill brokers were upset that BlackRock, one of the largest issuers of ARPS, hadn’t redeemed a larger percentage. This is just one example of a dynamic playing out across Wall Street. Citigroup is reportedly considering buying out the ARPS it sold to investors, a move widely seen as an attempt to hold off regulatory scrutiny. Now other firms, especially those already laden with debt in frozen markets, are attempting to avoid incurring the costs of bailing out ARPS investors by drawing attention to the role of the issuers.

Comments (7)

  1. 1
    Posted by guest | August 7, 2008 at 9:37 AM

    Can you imagine the SQUEEZE that this is putting on our goose stepping friends at UBS…

  2. 2
    Posted by guest | August 7, 2008 at 10:28 AM

    get on this Carney…
    http://www.reuters.com/article/bondsNews/idUSN0726119820080807
    how much is Citi going to cough up??

  3. 3
    Posted by guest | August 7, 2008 at 11:16 AM

    (DOW JONES) DJN: *DJ SEC: Citi To Buy Back $7.5B Of Auction-Rate Securities
    DJN: *DJ SEC: Citi To Buy Back $7.5B Of Auction-Rate Securities

  4. 4
    Posted by guest | August 7, 2008 at 11:17 AM

    (DOW JONES) DJN: *DJ SEC: Buybacks For Individuals, Small Businesses, Charities

  5. 5
    Posted by guest | August 7, 2008 at 12:04 PM

    Any word on Chase Bank’s auction rate securities?

  6. 6
    Posted by guest | August 7, 2008 at 12:10 PM

    this is fucking disgraceful.
    these are public companies.

  7. 7
    Posted by guest | August 7, 2008 at 2:04 PM

    I’m sure the closed-end funds would be happy to redeem at a 50% discount. Whiners want liquidity, whiners gotta pay.

Leave a comment

You can log in with your account or comment as a guest below.

   or