Secondary bids value auction debt 5-25 pct below par

By Anastasija Johnson

NEW YORK, April 2 (Reuters) - Investors stuck with auction-rate securities can sell them in the developing secondary market, but they are likely to recover only between 75 to 95 cents on the dollar.

That is the average range of bids for auction rate bonds offered for sale on an electronic trading platform managed by New York-based Restricted Stock Partners, the company's CEO Barry Silbert told Reuters.

These secondary market bids provide some indication of write-downs facing cash-strapped dealers with auction rate securities on their books and of losses facing investors in need of cash.

The Restricted Securities Trading Network began trading auction rate securities in early March after the $330 billion market succumbed to a global credit crunch and investors could not sell securities once considered almost as safe as cash.

Silbert said currently over 150 different securities are listed for sale on the trading platform and he expects activity to pick up once investors realize that they may not be able to recover the full face value of their securities in the future.

UBS AG (UBSN.VX: Quote, Profile, Research, Stock Buzz) on Friday began lowering the values of auction-rate securities held by its clients. For details click on [ID:nN29294690].

"The UBS news was a bit of a reality check for a lot of holders," Silbert said.

"Up until then, major brokerage firms were not demonstrating to the customers that there was any risk to the principal. By marking it down, it telegraphed to customers that the secondary market may be an attractive way to free up some liquidity albeit at a discount."