Replies to post #1874 on Lehman Brothers Holdings Capital Trust III (LEHKQ)

[@-@]

Agree with you. While the LEHKQ, LEHLQ, LEHNQ, and LHHMQ are called "subordinate," people mistake that for the legal term in bankruptcies. In the bankruptcy the term "subordinate" refers to an equity such as LEHMQ and all preferreds CONVERTIBLE INTO EQUITY. Anything to do with equities is legally "subordinate" because it's considered ownership in the company. So our "subordinate" debt isn't really legally "subordinate" and the preferred and common guys may have the surprise you refer to.

That doesn't mean they won't get anything. For instance, when Coleco went bankrupt 20 years ago, I received like $36 for what I paid $1000 for as a Q investment.

But after being involved in some Chapter 11s of some businesses I consulted for, I pretty much learned who gets paid and who doesn't. I believe that the unsecured notes, such as the Capital Trusts, will receive upwards of 10% on face. The Senior bonds may receive more. But don't pay attention to the prospectus that says they'll get paid first no matter what because the Courts always base it on percentages and they don't give zero to non-legally subordinated creditors. So it's not going to be, "Senior's get 80%, juniors get zero." Haven't ever seen a bankruptcy like that.

[marayatano]

"Makes you wonder why the senior unsecured unsubs are selling for 16 cents on the dollar. Obviously this debt that is selling for more has better ranking. I would like to see the senior unsub raising in price before I give any chance to the preferred trusts receiving anything.

Personally I don't think the traditional preferred nor the common have any chance at all of receiving anything when this is all over."

Joe, the reason why they are selling at .37 on the dollars is because they are tied to security and are above senior debt. I know some on the board are saying that since "this" debt is selling for .37 on the $, then trust preferreds should be getting the same .37 on the $ and it only takes 1.2 billion to cover preferred trusts (it is really $17.6 billion to cover the entire certain class). Not true. Bankruptcy has an order of priority. That is why you will have different classes of debt trade at different prices (but I know you knew that.) Subordinate debt should trade above 50% to gauge confidence in recovery for trusts.

This is why I am afraid of derivatives. They are above senior debt. What this .37 on the $ debt does NOT fully recover from security, will come from the pool of money or assets that are suppose to go to senior debt, sub debt, jr. sub, etc.

There is really more, but I hate typing . . .

I am only replying because I know you are a good and up standing guy (not saying everyone else is bad) and want you to have the full unbiased story.

Anyhow, the longer it takes to unwind Lehman, they better it will be for "stakeholders."

IMO