Paulson's Lehman Bet Poised To Wipe Out Sino-Forest Loss

Jul 5 2011 | 1:13pm ET

Paulson & Co. may recoup almost every penny it lost on a Chinese timber bet with its bet on Lehman Brothers bonds.

Under a deal struck by two warring groups of creditors last week, Paulson is poised to enjoy a $554 million profit on its Lehman bond holdings. While the hedge fund first bought Lehman bonds just before the bank collapsed in 2008 for 14 cents more than the agreement calls for it to be paid, it gorged itself on bonds over the ensuing two-and-a-half years, and now owns about $4 billion worth of bonds it paid an average of 7.3 cents for, Financial News reports.

The Lehman deal calls for bondholders to receive 21.1 cents on the dollar.

The $554 million profit, which still requires official creditor approval to become a reality, will offset the $574 million Paulson lost last month on Sino-Forest Corp. That company's shares plummeted when hedge fund Muddy Waters accused it of overstating its timberland holdings in China's Yunnan Province, leading Paulson to dump its 12.5% stake two weeks ago.

The hedge fund probably should have held onto that stake for a little longer: News Friday that Wellington Management had taken an 11.5% stake in Sino-Forest sent the company's shares, which had fallen more than 80%, up 30%. Sino-Forest, which trades in Toronto, is up a further 19% today.


In Depth

Q&A: High Conviction, Low Correlation

Oct 30 2014 | 7:35am ET

Acadian Asset Management's numbers are big: over $70 billion in assets under management...

Lifestyle

Ex-Hedgie Steyer Gives $56M To Climate Action Super PAC

Oct 28 2014 | 9:23am ET

Retired Farallon Capital founder Tom Steyer has poured almost $56 million into his...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Demeter: Family affair

David and James Hamman launched their fundamental Livestock and Grains Program in March of 2010 but it really was decades in the making.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.