Initial results of Lehman CDS auction

By Edward Harrison On Oct 10, 2008

This comes via Credit Fixings.

The auction process to settle Credit Default Swap trades on Lehman Brothers bonds put the value of the debt at 9.75 cents on the dollar. That is much lower than one would have expected (12 cents on the dollar was the expected rate according to Market Beat). While this is an initial auction fixing, it is somewhat worrying. A good friend told me recently that his 80-year old mother was invested in these bonds and that she had taken large losses on her portfolio. It bears remembering that individuals — some widows and orphans like my friend’s mother — are the faceless investors behind these events.

UPDATE: The orders were finalized for 8.625 cents on the dollar (see EconomPic Data)

Edward Harrison 7783 posts 575 comments

Edward Harrison is a senior Editor at Bloomberg. He is also the founder of Credit Writedowns newsletter, a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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2 Comments

Nick von Mises says 16 years ago

So alot of hedgies and insurance companies are gonna get absolutely reamed? Even worse than they expected?
Edward Harrison says 16 years ago

nick,

you are definitely going to see some major hedgie blow ups soon. My understanding is that hedge funds in London were also exposed to major losses due to Lehman’s bankruptcy where that was not the case in the U.S.

I see some major consolidation in the hedge fund world happening in the very near future.

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