Despite Impressions, Most Auction Rate Securities Are Healthy Page 2
So this is going to take some creativity. You can bet that Citi already has legions of investment bankers working on structuring something to create an out. Perhaps some sort of re-securitization where Citi puts a series of these SLARS into yet another trust and then sells bonds with a legal put to fund the trust.
Either way, it is good news for investors stuck in ARS. It should free up some cash, which will most likely flow into short-term municipal bonds. Ultimately, it should be something with which Citi (and other dealers) can handle in terms of liquidity.
Remember that student loan ABS are eligible as collateral at the discount window and the TSLF, and most of the underlying loans are government-backed. But it will be a distraction.
P.S. Will you be there when Cramer makes his next move?
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Bonds It's Too Early to Buy Bank Debt 7/25/2008 11:29 AM EDT Despite a recent rally, serious credit risks remain for financial firms.
At the time of publication, Graff had no positions in the stocks mentioned, although positions may change at any time.Tom Graff is a Managing Director of Cavanaugh Capital Management, a registered investment advisor in Baltimore Maryland. The opinions expressed here are Graff's own and in no way are the statements of Cavanaugh Capital Management, and may or may not reflect the strategies being pursued for clients of Cavanaugh Capital Management. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Graff appreciates your feedback; click here to send him an email.
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