Times are hard when an institution needs to bid on their own outstanding bonds, but that's where things stand. For weeks, hospitals have been petitioning Congress for permission to do just that--without being suspected of manipulating the markets. They want this permission so that if no one else bids on their auction, they can do the bidding themselves, and avoid the "reset" that could result in interest rates as high as 20 percent. With help from Sen. Charles Schumer (D-NY), who approached the SEC to seek the agency's help, hospitals have gotten what they wanted.
In a letter issued this week, the SEC said that it would allow borrowers to bid on their own debt if they met several terms--including disclosing their bids before and after the auction, and making bids that only were contractually appropriate, permissible under federal securities law, state law or the rules of any self-regulatory organization. Now, the question is, how many hospitals will have to exercise this option? For their sake, let's hope it's only a few, but that may be far too optimistic.
To learn more about the bond repurchase mess:
- read this Modern Healthcare piece (reg. req.)
- read this article from The Boston Globe
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