Reply #46: Big names eye Lehman’s debt

[Demeter]

http://www.ft.com/cms/s/0/3aa71240-5ea1-11de-91ad-00144...

The hedge funds that have been buying Lehman debt at a discount include some of the industry’s best-known operators – such as Elliott Associates, John Paulson’s Paulson & Co, King Street and Centerbridge Partners .

However, in spite of all the interest, buying Lehman debt is not an investment for the faint of heart. Sorting out the claims in the case could take years, and that means investors will have to pay big legal fees while waiting patiently for courts to rule.

“You can’t analyse Lehman by looking at its assets and liabilities or assessing the business model. Lehman is like betting on red 27 on the roulette table,” said the co-founder of a leading credit hedge fund who has decided against buying Lehman debt. “It isn’t about investing; it is all about probabilities you can’t quantify.”

Elliott said in a recent letter to its investors that it expected “to spend more time in the months ahead” looking into foreign affiliates of Lehman that it believes “owe tens of billions of dollars back to the Lehman holding company”.

Court documents say Elliott, King Street and Paulson together control $12.5bn in claims. In its letter, Elliott said: “In the March quarter, we continued to build the position in the Lehman Brothers claims.”