U.S. auction-rate paper values all over map

By Joan Gralla

NEW YORK, April 2 (Reuters) - U.S. municipal auction rate securities, once touted as the next best thing to cash, are now valued all over the map, with some investment bankers even unwilling to give estimates in a market chilled by credit worries.

How much these long-term, floating-rate issues are worth depends on your own banker, as the approaches used range from valuing them at par to relying on third-party estimates.

Many wealthy individuals and corporations -- the major holders of these bonds -- are stuck as they try to sell them in time to pay income taxes.

Some bank clients have been told the value of certain securities is "N/A," or not available, which can appear startling online, as the computer shows them worth zero, according to investment banking sources who requested anonymity.

In the developing secondary market, these bonds only fetch 75 cents to 95 cents on the dollar, according to Barry Silbert, chief executive officer of New York-based Restricted Stock Partners, which runs an electronic trading service.

Merrill Lynch in a statement said: "For our March client statements we will again rely on third-party pricing services to estimate the value of our clients' ARS (auction rate securities)."

"We make clear to our clients in a disclosure statement that given ongoing market illiquidity, actual trades cannot be completed at these estimated values," it added.

A Merrill spokesman was not immediately available to elaborate on the estimates.