Presidential Life Corp., responding yesterday to charges by the Securities and Exchange Commission that it overstated 1989 results by improperly reporting junk bond holdings, said an accounting standard was "ambiguously worded."

"The [Securities and Exchange Commission] administrative proceedings filed yesterday follow a disagreement with the SEC over the proper interpretation of an ambiguously worded accounting standard about which there is considerable disagreement in the accounting profession and the business community," Presidential said in a brief statement.

"It involves our 1989 financial report and does not in any way relate to or affect our current strong financial conditions." the statement says.

The SEC on Tuesday issued a cease and desist order against the Nyack, N.Y.-based holding company, charging that it violated reporting requirements under federal securities laws.

The SEC's order marks the first time it has charged a financial institution with improperly accounting for junk bond investments.

Among other things, the order says Presidential improperly accounted for its junk bonds and other securities, thereby overstating its pre-tax 1989 results.

Presidential failed to account for securities whose market value had fallen by about $25 million or about 37% of the company's reported pre-tax income, the SEC alleges. Declines in the market value of Presidential's junk bonds accounted for 20.7 million of the $25 million drop, the SEC said.

The SEC's order charges that Presidential did not follow generally accepted accounting principles in stating the value of some of its debt and equity investments for the year ended Dec. 31, 1989, and for some later periods.

Instead. the SEC alleges, Presidential employed an accounting method that was superceded by GAAP in 1983.

Since then, investment securities suffering "other than temporary" losses in market value must be written down to their net realizable value, according to GAAP. Those write-downs must be reflected as a charge to the income statement.

Because it used the old system, Presidential failed to take any charge to income for the securities it held as of Dec. 31, 1989, that had suffered such sustained declines.

The SEC's order also charges that Presidential failed to keep accurate books and records and lacked sufficient internal controls.

Responding to Presidential's statement, Jeffrey R. Zuckerman, an assistant regional administrator in the SEC's enforcement division, said: "The allegations in the order make clear that there are questions that the [SEC] staff has about Presidential's accounting procedures that go beyond their reporting in 1989."

Mr. Zuckerman added that the company failed to properly assess the value of its securities portfolio as required by federal securities laws. He cited Presidential's 1989 10K filing, in which the company said its "investments in high-yield/high-risk obligations will have no material adverse effects."

At that time, $878 million of the bonds the company held were rated as non-investment grade by Moody's Investors Service and $761 million of its bonds lacked a Moody,s rating. Together, those bonds accounted for more than 80% of Presidential's yearend 1989 bond holdings, Mr. Zuckerman said.

The SEC's order seeks to have the company stop its current improper accounting processes, correct earlier inaccuracies in its financial statements, and hire an independent consultant to help it institute and adhere to proper procedures.

An administrative law judge will schedule a hearing to determine whether the charges are true. That hearing could come as soon as 30 days following the order, Mr. Zuckerman said. He added, however, that the hearing will likely come later than sooner.

Further comment could not be obtained from Presidential.

In secondary trading yesterday, high-grade bonds fell about 1/4 point with Treasuries. High-yield bonds finished unchanged in thin trading. The market was strong in some spots and weaker in others but had no real pattern, one trader said. Some cable issues finished weaker in part because some of the upcoming new issues expected to come from that industry.

New Issues

HF Ahmanson issued $250 million of 8.25% notes due 2002. The noncallable notes were priced at 99.60 to yield 8.31% or 180 basis points over comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's Corp. rates it BBB-plus. Goldman, Sachs & Co. lead managed the offering.

Aon Corp. issued a two-part offering totaling $200 million. The first tranche consisted of $100 million of 6.875% notes due 1999. The noncallable notes were priced at 99.698 to yield 6.93%, or 85 basis points over comparable Treasuries. The second consisted of $100 million of 7.4% notes due 2002. The noncallable notes were priced at 99.97 to yield 7.43%, or 90 basis points over comparable Treasuries. Moody's rates the offering A1, while Standard & Poor's rates it AA. Morgan Stanley & Co. lead managed the offering.

WR Grace issued $150 million of 7.750% notes due 2002 at par. The noncallable notes were priced to yield 122 basis points over 10-year Treasuries. Moody's rates the offering Baa3, while Standard & Poor's rates it BBB-minus. Salomon Brothers Inc. lead managed the offering.

Boatmen's Bancshares Inc. issued $100 million of 7.625% subordinated notes due 2004 at par. The noncallable notes were priced to yield 111 basis points over 10-year Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it A-minus. Goldman Sachs lead managed the offering.

Georgia Power Co. issued $ 100 million of 7% first mortgage bonds due 2000. Noncallable for five years, the bonds were priced at 99.585 to yield 7.069% or 87.5 basis points over comparable Treasuries. Moody's rates the offering A3, while Standard & Poor's rates it A-minus. Morgan Stanley & Co. won competitive bidding to underwrite the offering.

Metropolitan Finance Co. issued $75 million of 8.25% subordinated notes due 1999. The notes are callable after three years at par. Standard & Poor's rates the offering BB-minus. The offering was increased from $60 million. Dain Bosworth Inc. lead managed the offering.

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