Centra, like many other health care systems in the nation, used the Auction Rate Securities market as an option to finance long-term debt, using a system of investor bidding and buying of bonds for the short term and a quick return. The auction rate securities are a form of variable rate bond, but for very short periods — a few days, a week or a month. Centra’s use of Auction Rate Securities included a default rate of 15 percent if bondholders wanted to sell, but there wasn’t a buyer. In buying back the bonds, Centra becomes both the issuer of the debt and the holder of the debt and has set the rate at 2. The solution most attractive to Centra is to convert the auction rate securities to Variable Rate Demand Bonds (VRDBs), which would reset every seven days like the old system. Addison said the banks have committed to provide Centra letters of credit “when we put in place the permanent solution, if we use variable rate demand bonds. read more