NEWS & UPDATES
Houlihan Smith & Company is Leading Provider of Auction Rate Securities Valuations
Chicago, IL (April 2008) – Abuses in sub-prime mortgage lending have triggered a “crisis of confidence” in the U.S. credit markets, according to Federal Reserve Board Chairman Ben Bernanke. Auction Rate Securities (“ARS”), which have not witnessed defaults on the underlying collateral since the early 1990s, have been treated by CFOs and Treasurers as conservative, short-term investments that were practically equivalent to cash.
However, due to the failing credit markets, investors have been left without the ability to liquidate their ARS portfolios – causing companies to redefine the use of cash equivalents on their balance sheets. Even companies with ARS portfolios backed by the most secure and reliable collateral have suffered due to the extreme loss of liquidity.
"We view the current failing conditions in the ARS market being more indicative of a liquidity issue rather than a credit issue."
-Karl D’Cunha, Senior Vice President, Financial Opinions and Valuation Services Group
Since the third quarter of 2007, Houlihan Smith & Co.’s experienced team of professionals have been valuing billions of dollars in failed ARS and other structured securities for some of the largest companies traded on the NYSE, AMEX, NASDAQ and other global exchanges. These ARS portfolios include:
- Student Loan Auction Rate Securities (“SLARS”)
- Auction Rate Preferred Securities (collateralized by tax-exempt municipal bonds)
- Statutory Reserve Requirement ARS
- Complex Structured ARS issues by credit derivative product companies (“CDPC”)
"Not every ARS is structured equally. The type and quality of the underlying collateral has a direct impact on the overall valuation of the security."
-Karl D’Cunha
Houlihan has developed a proprietary approach to valuing ARS that is presented in a clear and transparent manner. The methodology and underlying assumptions have cleared numerous Big 4 auditing firm reviews and have helped our clients ensure that they are properly recording these investments for financial reporting purposes.
HOULIHAN SMITH & COMPANY INC. ("Houlihan") is a national investment banking firm that specializes in providing financial opinions, valuation services and corporate advisory to public and private businesses. Our firm has more than 125 experienced professionals with extensive industry expertise. This enables us to quickly respond and efficiently handle complex client engagements. Established in 1996, Houlihan is a registered broker-dealer and FINRA member committed to the highest levels of professional standards. The Houlihan name is synonymous with valuation and deal making expertise, leveraging years of experience, reputation and relationships.
We are also a recognized leader in corporate advisory services, having successfully transacted more than 500 merger and acquisition, capital restructuring, private placement, bankruptcy services, and ESOP advisory engagements. Every client situation is unique; therefore, we take the time to understand our clients’ needs to best match buyers and sellers, arrange appropriate financing, and create capitalization structures that optimize each client’s potential.
For more information regarding our ARS valuation and advisory services, please contact, Karl D’Cunha at 312.499.5900 or e-mail Karl D'Cunha
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