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…Auction rate securities were viewed as cash equivalents from the inception of the ARS market in 1984 until February 2008, according to Pluris Valuation Advisors, a valuation firm that specializes in illiquid and distressed securities and business valuations, with offices in New York and California. Like other cash-equivalent securities, they were marked at par. Corporate or municipal bonds with a long-term nominal maturity where the interest rate is regularly reset are typical examples of ARS.

…The firm conducted a survey of ARS holders using financial data as of June 30, 2010. It found 348 holders of ARS, with the holdings having a total par value of $12.85 billion. The survey also found that 299 firms had adjusted down the value of these investments while 49 firms still accounted for their ARS holdings at par value. The aggregate impairment amount for the 299 firms with impaired holdings totaled $2.6 billion, and included both temporary and other-than-temporary impairments.

…While many investors might have once thought of impairment as something that only results from deterioration in credit quality or an increase in default risk, there is no reason to not associate a reduction in liquidity with a drop in value now, Robak said.

…”The secondary market for ARS is getting more active. People who marked securities to market price are now marking them up.”