WASHINGTON -- Though the fate of pending bank refor legislation is in question, some credit analysts are worried the bill could have an adverse impact on about $3.2 billion of tax-exempt bonds indirectly backed by federal deposit insurance.

The legislation currently would grandfather the debt, allowing it to continue to be covered by the Federal Deposit Insurance Corp. The House and Senate banking committees, however, have not yet begun deliberations on the bill, adding an element of uncertainty about the bonds' fate.

Standard & Poor's Corp., in the March 18 issue of CreditWeek, warned that congressional attempts to limit pass-through insurance coverage could endanger the ratings of 522 issues. Those issues currently are rated AAA-L by Standard & Poor's. The "L" indicates the rating is limited.

The bond in question generally were issued by states and municipalities on a non-recourse basis and were secured by certificates of deposit issued by institutions insured by the Federal Deposit Insurance Corp. or the Federal Savings and Loan Insurance Corp. The FSLIC has since been folded into the FDIC.

The transactions were popular from October 1982 to April 1983, and were used primarily to finance construction of multifamily housing units. The bond issuer would invest its proceeds in certificates of deposit from an insured institution, which then was obligated to make mortgage loans to project developers equal to the face amount of the certificates of deposit.

In the case of a bank failure, bondholders would be insured up to $100,000. The "L" designation on the AAA rating is intended to warn investors that if they hold more than $100,000 of bonds or have other accounts at the issuing the certificate of deposit, their insurance would not exceed $100,000.

Because of the enormous stress on the FDIC and an accompanying need to recapitalize the fund, lawmakers are anxious to limit the deposit insurer's liability in bank failures. Consequently, they are looking for ways to cut down the scope of what the FDIC can insure.

Should the grandfather provisions protecting the AAA-L bonds fall as the bill moves through Congress and the legislation is signed into law, Standard & Poor's has warned it may be necessary to suspend or lower all AAA-L ratings.

Nancy Olson, a Standard & Poor's vice president, said one option would be to lower the ratings on the bonds to the long-term credit rating of the insured institutions issuing the certificates of deposit.

Moody's Investors Service several years ago adopted that approach because of increased record-keeping requirements adopted by the FDIC. An analyst there said the move dropped many of the ratings to the Aa level but that the appetite for the bonds by pension funds did not seem to diminish.

Ms. Olson said the practice of backing bonds with certificates of deposit issued by federally insured institutions is not common now. But some issuers have expressed interest in doing refundings.

However, Ms. Olson said that until the issue is resolved by Congress, Standard & Poor's will not rate any refunding of existing AAA-L transactions.

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