Silverbird
Well-known member
May 19 (Bloomberg) -- The collapse of the auction-rate bond market is costing shareholders of companies from Google Inc. to Royal Bank of Canada more than $1.8 billion in investment losses.
Google, owner of the most popular Internet search engine, reported on May 12 that it lost $10.8 million on $259.6 million it had invested in the bonds, marking down the debt by about 4 percent. Royal Bank of Canada, that country's largest lender, told shareholders on May 14 that the value of its investments fell by $185 million.
More than 300 companies are struggling to value auction- rate bonds after dealers battered by subprime-related losses abandoned the $330 billion market in February, said Barry Silbert, chief executive officer of New York-based Restricted Stock Partners, which operates the largest trading system for the securities. About half the companies reported losses totaling $1.8 billion as the market for the securities, sold as higher-yielding alternatives to money markets, seized up....
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Auction Failures
Rates on the bonds and preferred shares sold by municipal governments, student-loan organizations and mutual funds are determined by bidding every seven, 28 or 35 days. If demand is insufficient, the auction fails and some holders are left with securities they wanted to sell. The issuer gets stuck with a penalty rate as high as 20 percent. In some cases, the rate can temporarily drop to zero....
http://www.bloomberg.com/apps/news?pid=20601087&sid=aj21tq8FG9gE&refer=home
Google, owner of the most popular Internet search engine, reported on May 12 that it lost $10.8 million on $259.6 million it had invested in the bonds, marking down the debt by about 4 percent. Royal Bank of Canada, that country's largest lender, told shareholders on May 14 that the value of its investments fell by $185 million.
More than 300 companies are struggling to value auction- rate bonds after dealers battered by subprime-related losses abandoned the $330 billion market in February, said Barry Silbert, chief executive officer of New York-based Restricted Stock Partners, which operates the largest trading system for the securities. About half the companies reported losses totaling $1.8 billion as the market for the securities, sold as higher-yielding alternatives to money markets, seized up....
...
Auction Failures
Rates on the bonds and preferred shares sold by municipal governments, student-loan organizations and mutual funds are determined by bidding every seven, 28 or 35 days. If demand is insufficient, the auction fails and some holders are left with securities they wanted to sell. The issuer gets stuck with a penalty rate as high as 20 percent. In some cases, the rate can temporarily drop to zero....
http://www.bloomberg.com/apps/news?pid=20601087&sid=aj21tq8FG9gE&refer=home
