Financial Times: Lehman bondholders could lose $120bn

[marmar]

Lehman bondholders could lose $120bn
By Nicole Bullock and Aline van Duyn in New York

Published: September 22 2008 19:19 | Last updated: September 22 2008 19:19


Investors owning Lehman Brothers bonds face potential losses of close to $120bn, reflecting the sharp reductions in the value of assets that are likely to be left to be paid out to creditors.

In the week since Lehman Brothers, the fourth largest investment bank in the US, filed for bankruptcy, the value of its bonds have plummeted.

Further losses on its derivatives positions, which are still being unwound, could leave even less on the table for bond investors, according to traders.

“I don’t know how this will play out for bondholders, but I doubt if it’s going to be good,” said Dan Fuss, vice-chairman of Loomis Sayles, which has a small holding of Lehman bonds. “That’s what the market tells you and it tells you that so strongly.”

Lehman bonds were widely held by investors such as pension funds and mutual funds. This means the losses will have a far-reaching effect on ordinary investors, and the damage from Lehman Brothers has contributed to an unwillingness by investors to take on credit risk.

Just one week before Lehman filed for bankruptcy, its $110bn of senior bonds were quoted close to 95 cents on the dollar. Bond prices then plunged to 35 cents a week ago when the investment bank failed to find a white knight. They are now trading at about 18 cents to the dollar. ......(more)

The complete piece is at: http://www.ft.com/cms/s/0/d9d096c4-88ce-11dd-a179-0000779fd18c.html

[RUMMYisFROSTED]

1. A one and a two...

:nopity:

[enlightenment]

2. On the one hand, yeah - but

Lehman bonds were widely held by investors such as pension funds and mutual funds. This means the losses will have a far-reaching effect on ordinary investor . . .

I don't have much sympathy for speculators (if any), but to suggest (as has been done on DU) that the average corporate wage slave with their tiny 401K or pension fund investment should have known every detail - and been financially savvy enough to say no - even if they could, because not all companies give their drones that much control over their "portfolio" . . . well that's a bit cruel, don't you think?

[tama]

3. What is cruel and wrong

to begin with, is the model of ownership society. Don't know why, but I have never wanted any part in that mortal sin nor any job that is not ethical. And any and all jobs and assets direcly related to ownership society and consumerism are deeply unethical.

[slipslidingaway]

4. You bring up two important points, maybe three...

-years ago the company that you worked for would manage the pension funds.

-those managers had more financial knowledge than the average employee today.

-even if employees educate themselves they are limited to certain funds and often how frequently they can change between funds.


401K's have their advantages, but we may now be seeing the disadvantages as well.

[avaistheone1]

5. Very true. Many employer lock you into their 401k plan often times limiting

the employee to invest their retirement dollars in only one investment company Vanguard, Lehman etc. You are then at the mercy of that investment company and whatever programs they want to offer you. From what I have seen the programs offered by any given investment company into these 401k investment programs are slim pickings and not that attractive.