Stifel Financial plans 100% buyback of ARS

Stifel Financial Corp. said Monday it plans to buy back all auction rate securities held by its retail investors, who bought them prior to the collapse of the ARS market in February 2008. Stifel said it will begin the buyback in June and over the next three years its subsidiary, Stifel Nicolaus & Co., will offer to buy all the ARS held at Stifel. The company had announced Feb. 11 a voluntary plan in which it planned to buy back up to 10 percent or $25,000 of ARS held by all retail clients who bought them at Stifel. The company said that process should be completed by June 30. After the initial repurchases, the company will begin additional repurchases from eligible investors during each of the next three years to be completed by June 30, 2012. Employee accounts would not be eligible until the last phase of the retail investor repurchasing is completed. The auction-rate securities market involved investors buying and selling instruments that resembled corporate debt whose interest rates were reset at regular auctions, some as frequently as once a week. They were sold as being as safe as cash, but the market for them fell apart earlier this year amid the downturn in the broader credit markets. Many Wall Street companies have agreed to buy back securities, including Merrill Lynch & Co., Goldman Sachs Group Inc., Deutsche Bank, UBS AG, Citigroup Inc., Morgan Stanley, JPMorgan Chase & Co. and Wachovia Corp. Stifel has been evaluating the ARS market and said the expanded repurchase program strikes a balance between the interests of its clients and shareholders, Chief Executive Ronald J. Kruszewski said in a statement. "As we have said all along, neither Stifel nor its clients had access to the information available to the major market participants regarding the impending collapse of the ARS market," he said. "Had the major market participants disclosed to the entire marketplace the material facts known by them, Stifel would not have sold ARS to its clients." He said the plan ultimately will provide liquidity to all 1,200 of the company's ARS retail clients. The voluntary plan to repurchase these ARS is subject to redemptions, market conditions, and future events including events affecting Stifel's financial condition, the company said. Stifel Nicolaus provides securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Shares fell 50 cents to $29.50 in morning trading.