U.S. companies wrote down the value of their auction-rate securities by $1.85 billion in the first quarter as the market plunged, but disclosures about their exposure varied widely, according to a study released on Wednesday.
More write-downs are expected during the second quarter, said the study of 395 corporate auction rate holders from securities valuation firm Pluris Valuation Advisors LLC.
Auction-rate securities are long-term securities whose rates are reset at periodic short-term auctions.
Pressed by the credit crunch, the $330 billion auction rate market began freezing in late January, leaving many investors holding illiquid notes they had expected to behave more like cash. Auction-rate securities had been particularly popular with corporate holders, leaving hundreds of companies exposed.
The study showed that about 53 percent of the companies continued to account for the securities at their full "par value." The other 47 percent booked impairment charges.
"When auctions are failing because of a lack of demand for an asset, the logical conclusion is that some discount from par value is in order," Pluris President Espen Robak said in a statement. "However, it is not unusual for companies to take some time to analyze the issue and its impact on values."
Pluris said some companies may be uncertain about what constitutes a reasonable impairment, and that some auction-rate securities were more troubled than others. The write-downs, it said, varied from 98 percent of the value of the auction rates, to nothing.
According to the study, the largest discounts were taken by 90 companies where auction rates accounted for more than half of their cash holdings.
(Reporting by Emily Chasan, editing by Richard Chang)