Some of the tax-exempt put bonds backed by Mutual Benefit Life Insurance Co. were teetering on the brink of default late Friday.

A block of 500 bonds were tendered for payment to the remarketing agent -- Shearson Lehman Hutton -- and full payment of par was due to the investors by the close of business Friday. But according to the trustee on the deal, Mutual Benefit and the New Jersey Department of Insurance did not come through with the funds.

"It will be an event of default if we don't receive payment by the end of the day," said Arthur Honore, assistant vice president at Texas Commerce Bank last Friday. The close of business in Texas was after presstime.

Mr. Honore said $500,000 of bonds from two deals had been tendered but, as of late Friday, no payment had been received. The issues were sold by the Harris County, Tex., Housing Finance Corp. for the Pate's Crossing development and the Pate's Landing project.

"We did not get a response from [the insurance commission or Mutual Benefit] at all," Mr. Honore said. "They've been advised not to respond either way. We were told that the wire has not been set up, and the payment has not been made as of yet.

"We don't know if payment is coming today," he added. "Apparently, they are trying to figure out what to do."

Market sources say another raft of variable-rate put bonds are due to be paid off today, and this time the stakes are much higher. "There's a fair amount of bonds coming at them," a trader said. "And I can't see where one deal is going to get paid and the others aren't."

Investors holding the Fulton County, Ga., Housing Authority's $21 million 8 /14% multifamily housing revenue refunding bonds Series 1985E, have tendered a very large block of the bonds and will expect payment by the close of business today, according to traders. Investors have to give seven days notice for payment, and bondholders of the Fulton County and Harris County deals have done so, they said.

"It's a tone of bonds," one executive of a bond broker said. "I think sonebody ought to start kicking and screaming about this. Look what happened to the taxable bondholders with Executive Life."

Mutual Benefit guaranteed more than 60 tax-exempt bond issues totalling $815 million. Last week, the insurer was placed under the custodianship of the New Jersey Department of Insurance. Since then, the fate of tax-exempt bonds guaranteed by the company has been hanging in the balance. The most dire deals are the 18 variable-rate issues, totalling $243.8 million, which depend directly on the life insurer for payment.

Staff reporte Sean Monsarat contributed to this article.

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