$ 2 Billion Dollars of US Bankruptcy Claims Traded in August 2011
The September 22, 2011 New York Times includes this interesting article on the aggregate value of bankruptcy claim trading. The numbers provide at least a small insight into the litigation industry specific to chapter 11 cases in the US. The key section is pasted below.
September 21, 2011
Bankruptcy Claims Trading Slows in August
(Reuters) – U.S. bankruptcy claims trading dropped sharply in August from the previous month due to a decline of activity involving the Lehman Brothers Holding Inc bankruptcy, according to a private report.
The number of claims traded fell to 891 in August from 1,352 in July. The value of claims traded fell to $2.22 billion from $3.55 billion in July, which was the high point for this year, according to SecondMarket, which runs a claims trading platform.
Creditors such as landlords and trucking companies can trade or sell their claims against bankrupt companies. The seller gets immediate cash, while the buyer, often a hedge fund investor, hopes to make a handsome return by betting on the timing and ultimate payout in the bankruptcy.
The number of Lehman claims traded fell to 205 from 782 in July. The face value of the Lehman claims that traded fell to $2.1 billion from $3.4 billion in July.
Lehman Brothers, the largest bankruptcy in U.S. history, hopes to be out of bankruptcy and to begin repaying creditors early next year.
Other actively traded cases included restaurant chain Perkins & Marie Callender, college bookstore operator Nebraska Book Co, liquidating telecoms maker Nortel Networks Inc and chemical company W.R. Grace Co.
Several single claims were traded that had a large face value, although the actual price paid was not disclosed. Single claims worth more than $20 million that traded included those against Bear Island Paper Co, Lehman Brothers Inc and CMR Mortgage Fund II LLC.
(Reporting by Tom Hals, editing by Matthew Lewis)