Lehman Brothers Financial SA (LEHNQ)

[marayatano]

Yes, the subordination contract basically guarantees that CT will not be cancelled until they are no longer needed or the waterfall is depleted

The main thing about the subordination is that it benefits the senior notes holders and the estate.

By not canceling the CTs, there is no write off/down on NOLs to the estate and the way they effect seniors, is that any distribution that were directed to CTs, are then taken away and re-distributed to senior note holders. By doing this, the senior note holders get more of a return/recovery then the other creditors in the same tier or non subordinated claims/debt and CTs still with nothing because of subordination.

At this point, Lehman's seniors/creditors are expected to receive between 21%/27% recovery of face. Until it is paid in full of the allowed claims, then it will trickle down to CTs.

Bottom line: If your main contention of this being cancelled after the effective date, then I would put that to slim to none.

Risk is very high since seniors, even after taking CTs distribution is still only at 21/27% recovery of face, which these waaayyy out of the money.

Do not trade on any of my posts.

imo