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Star Tribune <br />Fin <br />.Sunday <br />October 1/1989 <br />Default <br />level high <br />for bSd$ <br />Trusts sold by <br />Bloomington firm; <br />.By Joe Blade <br />Staff Writer <br />An extraordinary level of defaults: <br />and financial reverses has struck ahit:' • <br />: trusts of high -risk, high -yield ntunici= <br />pal bonds. sold by the Bloomington_ :• <br />bond house of Miller & Schroeder • <br />Financial Inc_ • <br />An analysis by the Star Tribune-a <br />the trusts sold by the bond house. <br />between 1985 to 1987 reveals .that' <br />bonds that originally made up.'a. <br />quarter of the firm's $88 million -val;- <br />uc have suffered defaults or other' <br />troubles. • <br />By comparison, defaults on 46;268 : -: <br />municipal .issues sold nationwide: <br />. from 1984 through 1988 totalediust;' <br />1.1 percent, says the Public SecuriUcs' <br />.Administration in New York. • <br />"I would say that's high by any start <br />dard," a spokesman for the organza . <br />tion of municipal -bond underwriters` <br />said of the defaults in Miller &• <br />Schroeder s trusts. <br />Furthermore, the resale prices: of <br />bonds in five of the last 12 trusts has <br />fallen so far that if all investors-sold' . <br />now, they would suffer a $l0 million- <br />loss on their $40 million invcstmcnt:-:.- <br />Some of the troubled bonds continue^ <br />paying interest, while others have • <br />stopped; some have repaid thc'prin- }.. <br />cipal in whole or in part, while others '; <br />threaten holders with the loss of most. <br />their invcstmcnt. <br />Miller & Schroeder will not share in <br />investors' losses; confirmed Paul Ek- <br />holm, senior vice president at the' <br />bond house. The firm made its nton- <br />cy when it created and sold the trusts. <br />Ekholm -said •it'had stopped selling' <br />the trusts almost three' ycars ago :and <br />no longer had any activity in them. <br />• He did notcontcst figures on defaults <br />and the current value of the trusts <br />^- ^ "Weihou ht ih <br />g cy^•rrtct a'markct need :: <br />•..at the time ,_Ekholm said. `At the <br />time, 1 think: they were similar:. to! <br />:types of investments offered by.oticr. <br />dealers.' .C'.:i' r•.11.!ii;,';t, <br />' Unit trusts rhistoncally have been"a; <br />dull, safe investment that return <br />exempt intcrest`.•to':;invcstors. They.- <br />• provide a share in packages of mu -• <br />nicipal bonds that remain in the irust <br />• until they are paid oft' <br />Bonds-in Miller • &`Schrocdcr's !unit . <br />;trusts were w_dhtcd toward rcycnuc, <br />_bond�s,_wliiclt;arc,issucd,by private, <br />_ businesses undder:dlicatax,cxcmpt um- _.. <br />brclla of a go;rnmcnt body . ?;: <br />A key distinction ,between revenue <br />- bonds and :general obligation bonds'. <br />' is that the government entity -does. <br />not stand behind revenue bonds in: • <br />the event of dcfau1C.That's why :those <br />Bonds continued on, page 40 • <br />Page 3 <br />