When this year's municipal bond volume statistics are released in January, the industry plans to take credit in 1991 for more than $630 million of bonds not expected to be sold until at least 1993.
For the first time, contracts for municipal forward delivery products -- deals which for legal reasons underwriters go to great lengths to avoid calling "securities" -- will be counted as just that in the annual ranking of municipal bond underwriters supplied by Securities Data Co./Bond Buyer.
Municipal forwards are designed to effectively advance refund deals otherwise prohibited from such transactions by federal tax law. Investors sign contracts agreeing to purchase bonds at some point in the future, locking in current interest rates for an issuer. The delivery date usually corresponds to the first call on the outstanding issue.
Since 1989, almost $2 billion of municipal forwards have been sold under such acronyms as First Boston Corp.'s REDS and Alex. Brown & Sons' HEROs. For most of that time, Securities Data, The Bond Buyer's data base firm, counted the contracts separately from an individual firm's normal league rankings.
But following a survey of underwriters asking how the deals should be handled, Securities Data earlier this month decided to count forwards in the year in which the contract is signed, rather than when the bonds are actually sold.
Although the overall effect on individual firms' rankings is expected to be relatively minor -- the deals represent only about 0.6% of new issue volume so far this year -- several underwriters questioned Securities Data's logic.
"The rankings are supposed to be for actual bond issues," said Joseph Fichera, managing director of corporate finance at Bear, Stearns & Co. "Municipal forwards are not bond issues."
In fact, bond counsel often take pains to make clear the product is not a security, to avoid the federal regulations that accompany securities transactions and to avoid advance refunding the deal by having two bond issues outstanding at the same time.
In addition, if the Securities and Exchange Commission decided the contract was a separate security, it might attempt to regulate it.
"I guess SDC can say these are securities so long as the SEC doesn't," Mr. Fichera said.
Sandra J. Foight, municipal product manager at Securities Data, said the survey found strong opinions on both sides of the question. "But the consensus of opinion was to include" the contracts in the year they are signed, Ms. Foight said.
"We didn't make judgments on the arguments," she added. "Our job isn't to interpret what's going on in the market, but just to track the deals."
The Public Securities Association, which also keeps a data base of municipal bond transactions, has always counted municipal forwards in the year the contract is signed, according to a spokesman.
Supporters of the idea say the contracts are firm commitments by investors, and they point out that none of the 36 contracts signed since 1989 has ever unraveled.
But the potential for such a scenario remains a problem for others. "There are ways out of these contracts," said one official at a firm that markets a version of the municipal forward. "What do you do then, go back and delete?"
Securities Data's rankings are frequently used by underwriters to secure new business, so they have an incentive to include as many deals as possible in the listings.
One source at another firm said that may explain why many responded to Securities Data's survey the way they did.
"This is an attempt by underwriters to manipulate a data base in order to promote business," He said.
The volue of municipal forwards has kept an annual pace of roughly $650 million. But industry sources say they expect the products to become more attractive in the next few years, as 10-year call dates on numerous deals from the mid-1980s start to approach the 18-month window in which forwards typically are executed.