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Lehman Dec 18
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Lehman Brother Holdings Capital Trust Preferred Stocks: Still Trading After All These Years
Dec 17, 2015 | Seeking Alpha
By Wayne Olson
Four Lehman Brothers Holdings Inc. (LBHI) capital trust (CT) preferred stocks continue to trade in the over-the-counter market. These are the 6.00% Series M (OTCPink:LHHMQ), the 6.375% Series K (OTCGrey:LEHKQ), the 6.375% Series L (OTCPink:LEHLQ), and the 6.24% Series N (OTCPink:LEHNQ). Each of these CT preferred stocks has... -
The Junk Bond Rout That Wasn’t
Dec 17, 2015 | The New York Times
By James B. Stewart
...It’s too soon to say the worst is over for investors, or even that the junk bond crisis is over. It took over a year for the earliest signs of serious problems in the mortgage bond market to metastasize into the collapse of Lehman Brothers and a full-blown financial crisis...
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Lehman Brother Holdings Capital Trust Preferred Stocks: Still Trading After All These Years
Dec 17, 2015 | Seeking Alpha
By Wayne Olson
Four Lehman Brothers Holdings Inc. (LBHI) capital trust (CT) preferred stocks continue to trade in the over-the-counter market. These are the 6.00% Series M (OTCPink:LHHMQ), the 6.375% Series K (OTCGrey:LEHKQ), the 6.375% Series L (OTCPink:LEHLQ), and the 6.24% Series N (OTCPink:LEHNQ). Each of these CT preferred stocks has a liquidation amount of $25. There are 48 million shares of these CTs, with a liquidation amount of $1.2 billion.
Dividends have been suspended since 2008 (the prospectuses of these CT preferreds allow the preferred dividends to be suspended for only 20 quarters). In recent weeks, these CT preferred stocks have traded in the 10 to 20 cent range, which is less than one cent on the dollar in terms of market price to liquidation value.
Ali Meskati of T11 Capital has said that he views the Lehman Brothers Capital Trust Preferred shares (LBCTP) as "basically a call option on a positive outcome for the reemergence of Lehman in a yet to be determined form."
Bankruptcy Remote
CT preferred stocks are a type of special purpose vehicle (SPV) that are designed to be bankruptcy remote. The LBHI CTs are hybrid securities comprised of: (1) CT preferred stocks; and (2) subordinated debentures. The LEHNQ prospectus specifies:
"Upon any dissolution, winding-up or liquidation of the trust involving the liquidation of the subordinated debentures, the holders of the preferred securities will be entitled to receive, out of assets held by the trust, subject to the rights of any creditors of the trust, the liquidation distribution in cash. Upon any voluntary or involuntary liquidation or bankruptcy of Holdings, the property trustee, as holder of the subordinated debentures, would be a subordinated creditor of Holdings, subordinated in right of payment to all senior debt as set forth in the subordinated indenture, but entitled to receive payment in full of principal and interest before any stockholders of Holdings receive payments or distributions. Because Holdings is the guarantor under the guarantee and, under the subordinated indenture, has agreed to pay for all costs, expenses and liabilities of the trust (other than the trust's obligations to the holders of the preferred securities), the positions of a holder of preferred securities and a holder of the subordinated debentures relative to other creditors and to stockholders of Holdings in the event of liquidation or bankruptcy of Holdings would be substantially the same."...
For full story: http://seekingalpha.com/article/3762336-lehman-brother-holdings-capital-trust-preferred-stocks-still-trading-after-all-these-years
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The Junk Bond Rout That Wasn’t
Dec 17, 2015 | The New York Times
By James B. Stewart
After seven years of rock-bottom interest rates, it should come as no surprise to see excessive risk taking on Wall Street. Investors have long been trying to identify the next bubble, and last Friday Carl Icahn, the billionaire activist investor, weighed in.
...It’s too soon to say the worst is over for investors, or even that the junk bond crisis is over. It took over a year for the earliest signs of serious problems in the mortgage bond market to metastasize into the collapse of Lehman Brothers and a full-blown financial crisis.
But in conversations this week with a wide range of investors, Wall Street executives, and economists, no one told me they thought that the Third Avenue fund’s liquidation was likely to set off another crisis. And while bubbles may yet emerge, by their very nature they’re likely to be found somewhere entirely unexpected — not a closely watched, highly liquid market like the $1.3 trillion United States junk bond market.
...In part that’s because today’s junk bond market — and the institutions that invest in it — lack two important ingredients of past crises: high leverage (heavy borrowing to finance the purchase of assets) and concentrated bets. While Third Avenue’s portfolio was concentrated in thinly traded, obscure bonds, it had no leverage. Its failure didn’t put any lender in peril, the way the collapse of Lehman Brothers led to crises at A.I.G. and throughout Wall Street.
And most junk bond funds, including the two largest high-yield E.T.F.s, also have no leverage and are highly diversified, with hundreds of securities across all industries. Goldman said this week in a note to clients that outside the battered energy sector, “banks are still upbeat about credit quality.”
...Not all financial crises involve high leverage. The Reserve Fund, the money market mutual fund that “broke the buck” after Lehman Brothers collapsed, had no leverage. But its shares, designed to trade at a constant $1 and be the equivalent of cash, fell below $1 because its assets included Lehman debt, which plunged in value.
“Reserve breaking the buck was a huge systemic shock,” said Alan Blinder, professor of economics and public policy at Princeton, and author of “After the Music Stopped,” an analysis of the financial crisis. “Events might prove me wrong, but I doubt the analogy holds” with Third Avenue...
For full story: http://www.nytimes.com/2015/12/18/business/few-aftershocks-from-implosion-of-junk-bond-mutual-fund.html
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