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Sellers of protection on bankrupt Lehman Brothers Holdings will have to pay out 91.375 percent of the insurance they sold, based on the results of an auction on Friday to determine the value of the credit default swaps.
The final value of the contracts, which are estimated to be around $400 billion in volume, will be 8.625 percent, according to results published by auction administrators Creditex and Markit.
(David Faber discusses the stakes in the CDS game in the video).
The auction to settle Lehman's [LEHMQ
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] credit default swaps is one of the largest settlements of contracts in the $55 trillion market, with around $400 billion in contract volumes estimated on Lehman's debt.
Lehman's bankruptcy filing last month sent its bond values plunging as the majority of the investment banking assets that had supported the debt were purchased by Barclays Bank, leaving debt holders at the abandoned holding company with little to reclaim.
Lehman's bonds were trading in the 11 cent on the dollar area on Friday, compared to around 12-to-13 cents on Thursday, according to MarketAxess.
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