Skip to main content

Underwriters Pressure Issuers To Redeem Auction Rate Securities

  • Author:
  • Updated:

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.