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Star Tribune' <br />Sunday <br />October 1/1989 <br />1D <br />Default <br />level hies <br />f ®r. b®rlds': <br />Trusts sold by • <br />Bloomington firm; <br />By Joe Blade <br />Staff Writer <br />An extraordinary Icvcl of defaults: <br />and financial reverses has struck uniC' • <br />: trusts of high -risk, high -yield inunici <br />pal bonds. sold by the Bloomington;' <br />bond house of Miller & Schroeder_ <br />Financial Inc.. • <br />An analysis by the Star Tribune-5f <br />the trusts sold by the bond lions&. <br />between 1985 to 1987 reveals •that <br />bonds that originally made • up.''a. <br />quarter of the firm's $88 millionwal;.. <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 totaledjust;' <br />1.1 percent, says the Public Securities' <br />Administration in New York. • <br />"I would say that's high by any Stan <br />dard," a spokesman for the organizes . <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 />so far that if all investors'sold • . <br />now, they would suffer a $10 million- <br />loss on their $40 million investmcnf. I <br />Some of the troubled bonds continue, <br />paying interest, while others bave' <br />stopped; some have repaid thc'prin=,.. <br />cipal in whole or in part, while othefs- <br />threaten holders with the loss of tgost, <br />their investment. <br />Miller & Schroeder will not share in <br />investors' losses; confirmed 'Paul' Ek- <br />holm, senior vice president ai the <br />bond house. The firm made its mon <br />cy when it created and sold the trusts: <br />Ekholn ,said.it'had stopped selling <br />the trusts almost three years ago, and <br />no longer had any activity in them. <br />He did not-contest figures on defaults : <br />,..and the current valuo:ofthc:trusts ., . ; . <br />^`-"Wc'4hought'thcynnet'a i rharket need :, <br />H..:at. thcitinic,:':„ Ekholm'said. "At the <br />Mime, I'think -they were similar:. to: <br />;types of investments offered by other <br />dealers. i ' ;ti <br />1, <br />Uiiit 'trusts ill have been "a_`' <br />dull, safe investment that return tax;.: <br />exempt intcrest',to':;investors. -Thep:: <br />provide a sharc in packages of mu- <br />nicipal bonds that remain in the Trust; <br />until they are paid of . <br />Bonds in Miller. • &' Schrocdcr's' unit <br />.-trusts werowcjhlc7 toward cycnuc_- <br />_bonds wlfichtdre`, issued . by private' <br />businesses under;tlic,tax.cxcmpt um <br />• brclla of a'govcrnmeti body.'= <br />A key distinction..betwcen 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 default: That's why.those <br />Bonds continued on•page 4D ..._ <br />Page 59 <br />