Piper Jaffray Cos. said last night it will discontinue its tender-option bond program as result of market dislocations.

The company said its TOB trusts can no longer rely on selling variable-rate certificates at lower rates than yields on the underlying long-term bonds, which is necessary for tax-exempt status. In addition, Piper Jaffray said it could not find a replacement at “economically viable pricing” for its trusts’ liquidity provider, which plans to exit the market at the beginning of next year.

“Given these considerations, we believe it prudent to discontinue the TOB strategy,” Piper Jaffray chairman and chief executive officer Andrew S. Duff said in a conference call with investors.

The firm also said the TOB program lost its off-balance sheet status, and it moved $258.2 million in municipal bonds and $269.1 million in variable-rate trust certificates it sold back onto its balance sheet, as of Sept. 30. It has already reduced its exposure by selling $94 million of bonds.


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