Not-for-profits issuing municipal debt through investor auctions may join in the bidding, the Securities and Exchange Commission said. In a letter to the Securities Industry and Financial Markets Association and law firm Ropes & Gray, regulators laid out terms under which the SEC will allow bidding by borrowers for their own debt.
Interest rates on auctioned debt spiked in mid-February as the nations housing troubles dragged down investor confidence in municipal bond insurers. Borrowers must disclose bids on their own debt before and after an auction, the letter said. The guidance outlined when and what information borrowers must release to participate in auctions.
Other considerations, the SEC said, include whether such bids are permissible under contractual agreements, consistent with disclosure documents and otherwise permissible under federal securities law, state law or the rules of any self-regulatory organization. Tax-exempt healthcare issued one-quarter of the $196.2 billion in auction-rate securities issued over the past five years, according to Thompson Financial. -- by Melanie Evans
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