Lehman Brothers shareholders aren’t the only ones suffering in the wake of the firm’s bankruptcy filing; the value of the firm’s bonds has also decreased significantly.
Furthermore, there’s no word yet on whether Barclays will guarantee Lehman’s debt the way JP Morgan did for Bear Stearns.
FT: Investors owning Lehman Brothers bonds face potential losses of nearly $110bn, 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 has 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.
Fortunately, Barclays has offered jobs to 10,000 Lehman employees; 8,000 have so far accepted.
Last week, Lehman inked a deal to sell its prize asset, the North American investment banking business, to Barclays. That $1.75bn acquisition was completed on Monday, with Barclays immediately offering positions to 10,000 Lehman employees.
A spokesman said that by the end of business Monday, more than 8,000 Lehman people had signed on, including Bart McDade, who was president and chief operating officer of Lehman.
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