In its most recent survey of auction-rate securities holders, Pluris Valuation Advisors LLC found that 281 out of 460 public companies have taken write-downs on auction-rate securities worth $2.1 billion (a total par value of $32.2 billion). However, the remaining 179 companies still have to file 10-Q second quarter reports, and Pluris estimates that approximately 100 more companies will take impairments this month.
The filings with write-downs have increased from 40% to about 80%. The increasing write-downs signify a definite trend, but there is no consistency in the size of discounts, which have ranged from 98% to close to 0.
The survey also provides information about write-downs by audit-firms. For example, Deloitte and Touche, LLP’s fraction with write-down was 77% with an average 7% discount, KPMG write-down was 80% with a 13%average discount, Ernst & Young’s fraction-write down was 83%, with a 12% average discount. PricewaterhouseCoopers average discount was 12% with a fraction with write-down of 93%.
Pluris Valuation Advisors says that overall, the data from the survey indicates that all holders have not realized the full impact resulting from the loss of liquidity of the auction-rate securities market.
Auction-rate securities include corporate bonds, municipal bonds, and preferred stocks with interest rates or dividend yields that re-set periodically through auctions. Prior to the crisis in 2008, the ARS market grew to over $300 billion. Many investors were told that ARS were “equivalent to cash,” and have been dismayed that they have been unable to access their money since the market collapse.
Related Web Resources:
Pluris ARS Holders Survey, Plurisvaluation.com
Types of Auction-Rate Securities, Plurisvaluation.com
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