http://www.bloomberg.com/apps/news?pid=20601109&sid=a0kvXdQtvCWw
Eighteen months after investment banks quit supporting auction-rate securities that were once marketed as an equivalent to cash, companies from Dallas-based Texas Instruments Inc. to Israel’s Teva Pharmaceutical Industries Ltd. have more than doubled writedowns on the debt to $4.8 billion.
While U.S. state and federal regulators have announced settlements with 23 banks since December 2008, obliging them to repurchase a total of $61 billion in the bonds from individual investors, almost all new sales are failures. More than 400 companies stuck with $22 billion worth of the debt are selling at losses of as much as 40 cents on the dollar to get cash, according to SecondMarket Inc., a New York-based brokerage firm. Others have decided to wait decades until the securities mature.
“We’re not happy about this,” said James B. Flaws, chief financial officer of Corning Inc. The glass-fiber maker is one of two owners of Midland, Michigan-based Dow Corning Corp., a manufacturer of silicone products that holds $1.1 billion of the securities in a market once worth $330 billion.
Corning wrote down its share of the portfolio by $33 million and reclassified the assets as a long-term investment, according to a Securities and Exchange Commission filing for the quarter ended June 30. Its affiliate trusted the auction-rate market after functioning smoothly for more than two decades, Flaws said in a telephone interview.
