Wall Street showed more interest in Washington Public Power Supply System bonds yesterday after assessing the impact of the largest municipal default in history.
Bear Stearns & Co., which makes a market in the bonds issued to finance the canceled WPPSS projects No. 4 and No. 5, reported medium to brisk trading.
Speculators counting on some sort of WPPSS resurrection were picking up the bonds from individuals and institutions anxious to unload them. Prices ranged from 14 to 17 cents on the dollar for bonds that last week were selling for 17 to 20 cents.
The speculators are gambling on several possible events that could cause the bond prices to rise. Among those mentioned are a U.S. Supreme Court reversal of the Washington state court decision that the local municipalities and utilities do not have to honor their contracts to pay off the bondholders. They are also gambling that if the Northwest states have trouble selling bonds to finance other projects, they will raise their currently low electric rates to get money to pay off bondholders.
Finally, speculators see the possibility of a WPPSS bankruptcy, which could make available the assets of the power system's three other projects to pay off bonds on units No. 4 and No. 5. There is now a "Chinese wall" between those projects and the canceled reactors, but some attorneys argue it could be breached. Tough legal battles are expected before anyone gets paid for bonds financing the abandoned power plants.