Pluris Valuation Survey Finds Auction-Rate Securities Write-Downs Totaling $2.1 Billion

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
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.
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