Why Aren't People Talking About Lehman More?

Lehman was the largest bankruptcy to date. Why aren't people talking more about how to trade it?

I remember when Lehman collapsed, I was in Hong Kong. Coincidentally, I was so ill with the flu at that time that I thought I was about to die. Still, I managed to buy some Lehman bonds at that time. To make a short story long, I remember calling in to E*Trade and frantically trying to cancel my buy order on Lehman shares. The E*Trade guy was joking with me on that one. Then, a light bulb went on and I thought, why not buy their bonds?

Anyway, if what people are saying is true and we'll really get a return of $0.80 on the dollar, then that was one wise trade.

So, how much longer do we have to wait?

I'm going to have to do some more gold digging and study the Lehman pre-bankruptcy balance sheet. From what I could tell, long term debt was about $123 billion. If they've only collected $6 billion so far, that's just $0.048 on the dollar for bondholders. Their assets could be well over-inflated. If we assume they'll receive all the receivables they listed on their balance sheet, we'll arrive at an expected bondholder return of $0.35 on the dollar.

Ideally, I'd like to see a combination of a good percentage cash payout together with receiving some future equity in the company. The consensus is that Lehman has ceased to exist, but why do people say that when they've still got a 49% stake in Neuberger Berman?

I know I contradict myself a lot, but I am adamant about not buying stocks of already bankrupt companies. For me, if the bond could be had for pennies, it's much better to buy a bond of an already bankrupt company.