What better way can you think of for a hedge funds group to buy more debt cheap? How about a disclosure which will indicate there will be no recovery for certain classes. Then start buying up all those classes for the next several months before updated financial information shows substantially more assets and recovery. Some cities and other organizations of Paulson group also holds subordinate notes.
All the above is my opinion, after all who would believe me anyway since I drive a 1975 Vega!