Hedge Funds Buying And Selling Lehman Claims

Oct 31 2012 | 11:41am ET

In the thriving and surprisingly robust market for claims against Lehman Brothers Holdings, hedge funds are playing a big part.

Hedge funds are among both the biggest buyers and sellers of claims; many found their assets with Lehman's London-based prime brokerage frozen in the wake of the investment bank's collapse. But what could have proven a disaster may turn out a boon.

That's because Lehman's liquidators are doing a better job than perhaps initially expected in recovering assets. Most now expect that claimants will be paid at least the full amount of their claims, and possibly more: Under British law, a bankruptcy estate must pay 8% annual interest on claims if it can.

That prospect, plus a deal with Lehman's U.S. brokerage earlier this year, has investors positively bullish on the bankrupt bank. Claims are fetching at least face value on the secondary market; some are even selling at a premium, where in the wake of the collapse they got less than half of par.

Hedge funds are taking advantage on both sides. Claren Road Asset Management recently sold a $400 million claim for approximately face-value. And hedge funds including Elliott Management Corp., King Street Capital Management and Paulson & Co. are buying and holding claims, The Wall Street Journal reports.

What's more, the biggest buyers of the claims include investment banks—which may be buying them on behalf of hedge fund clients.

The first payments on claims are expected in November.


In Depth

Kettera Q&A: The Advantages of Alternative Investment Platforms

Oct 28 2016 | 5:52pm ET

The past several years have seen a distinct push towards easier and cheaper access...

Lifestyle

Midtown's Plaza District Fades As Manhattan Office Landscape Shifts

Nov 22 2016 | 6:32pm ET

Lower leasing costs, more efficient office space and the hope of projecting an image...

Guest Contributor

Nowhere to Hide: Why the Future of Asset Management Depends on Innovation

Nov 15 2016 | 6:55pm ET

Information technology has reshaped the asset management industry’s periphery,...

 

From the current issue of

Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

AVAILABLE NOW at BARNES & NOBLE

NEWSTAND LOCATOR