High Trading Activity on Bankruptcy Claims in April

by San Antonio Attorney

According to the data showed on Monday, the trading activity in April has been the highest in 2011 due to numerous bankruptcy claims trading in the case of Lehman Brothers Holding Inc.

Based on the report of SecondMarket, a bankruptcy claim trading operator, there is an increase of trading bankruptcy claims against Lehman Brothers from 743 in March to 892 in April. The value of the traded claims has also declined from $2.7 billion in March down to $2.2 billion in April.

Creditors or lenders such as landlords and transportation companies, can trade their claims against a bankrupt company. In the trading, the buyers are usually hedge fund investors hoping to get a considerable amount of return by wagering at the right time or by receiving a final payment out of the bankruptcy. On the other hand, the seller receives cash immediately.

The buyers have become more optimistic about the returns they might get on the claims against Lehman Brothers Holding Inc, which filed bankruptcy on 2008.

Trading has been greatly affected by the country’s recession since last year as numerous companies have failed, and fiscal crisis have reorganized and have worked its way out of bankruptcy.

It is uncertain what the ultimate value of the claims will be; theoretically, they could have no value at all based on how the case turns out in court. But suppose the returns are greater than what the buyers had paid for, some people may have increased their money into two-folds.

The bankruptcy of Lehman Brothers is the largest bankruptcy filing in the history of the country and the monthly trading activity is mostly consist of bankruptcy claims against the company. But in April, a record high $1.8 billion worth of claims against Lehman Brothers was traded.

Topics from the San Antonio bankruptcy section will have additional news information on bankruptcy.

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