REFILE-Debt issuers seek SEC approval to buy own debt- WSJ

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NEW YORK, Feb 26 (Reuters) - Brokerage firms and a group of hospitals have asked U.S. regulators to allow debt issuers to buy their own debt in an effort to avoid failed auctions that can dramatically drive up interest rates they must pay, the Wall Street Journal reported on Tuesday.

The SEC is weighing the requests but has not yet reached a decision, the newspaper said, citing unidentified people familiar with the matter.

The SEC is evaluating concerns about whether allowing such a practice with auction-rate securities would lead to market manipulation, the report said.

Fourteen hospitals and a Wall Street trade group have sent letters to the SEC, assuring it that allowing the move would not constitute market manipulation, the Journal said.

"The public finance market is attempting to develop longer term solutions, but we seek your assistance in connection with an immediate, short term 'fix' for this problem," Anne Phillips Ogilby, a lawyer representing 14 hospitals in California and Massachusetts, wrote in the letter quoted in the article.

A spokeswoman for the Securities Industry and Financial Markets Association confirmed to Reuters that it too sent a letter containing the request cited by the Journal to the SEC in recent days.

Auction-rate securities are long-term bonds with interest rates that reset through bidding, from every day to every 35 days. An auction fails if not enough buyers emerge to purchase all the bonds put out for sale.

Auctions are failing at the rate of of $15 billion to $25 billion per day, according to JP Morgan Securities.

The failures have left investors stuck with securities that had once been viewed as being almost as liquid as cash. (Reporting by Bill Berkrot; Editing by Jan Dahinten)