• 28
  • September
    2011

One piece of bankruptcy news our Tennessee readers may find interesting is that bankruptcy claims trading significantly decreased in August when compared to July. Bankruptcy claims trading is that practice of selling and buying claims against bankrupt companies.

In bankruptcy claim traded, creditors-landlords or trucking companies, for instance- trade or sell their claims against bankrupt companies for immediate cash, while the buyer -oftentimes a hedge fund manager-banks on reaping a reward once the claim is satisfied through the bankruptcy process.

According to sources, the number of these claims traded decreased from 1,352 in July to 891 in August. The value of these claims decreased from $2.22 billion from $3.55 billion in July. SecondMarket, a company that runs a claims trading platform, said the value of such claims in July was the high point for the year.

A decline of activity of the Lehman Brothers Holding Inc bankruptcy is thought to have been the reason for the decline. The number of Lehman claims in August was 205, compared to 782 in July. The value of those claims in August fell $1.3 billion, from $3.4 billion in July. Lehman Brothers, which is undergoing the largest bankruptcy in U.S. history, will likely begin repaying creditors early in 2012.

Some of the claims traded had very large values. Bear Island Paper Co, Lehman Brothers Inc and CMR Mortgage Fund II LLC all saw trading of claims worth over $20,000 million. Active trading was seen with Perkins & Marie Callender, Nebraska Book Co, Nortel Networks Inc and W.R. Grace Co.

Source: Reuters, "Bankruptcy claims trading slows in August," Sep 21, 2011.