Marketwatch’s Ben Eisen posted a story on the several types of beneficiaries of Lehman debt that have turned richer in the past two years as payments from the demise of the lender roll out. Lehman Brothers’ downfall singularly caused a shakeup in the entire financial base of the U.S. and brought about a widespread and long-lasting crisis. The incident marks its fifth anniversary this Sunday.
Paulson, Singer, Klarman getting richer with Lehman
An entire group of hedge funds bought Lehman’s debt and are now being paid a huge sum for the risk they took. As per WSJ, hedge funds have been paid handsomely on their distressed debt investments. Most notably, John Paulson raked in $1 billion from the claims he held of Lehman debt. Elliott Management has also netted close to $700 million from Lehman liquidations.
Other than John Paulson and Paul Singer, several hedge funds are seeing inflows from these liquidations. In Baupost Group’s Q1 shareholder letter, Seth Klarman said that they had seen payments from Lehman debt and expected them to continue throughout 2013. Until the end of 2012, Lehman constituted 20 percent of Klarman’s total assets under management, which stood at $26 billion till 4Q2012. In the first quarter letter, Klarman told investors that their asset base has grown by 2 percent with payments from Lehman debt in April
Baupost has received $1.5 billion from settlements of Lehman claims in the U.K and U.S. in 2012, and invested $1 billion Lehman Brothers Intl. Europe claims are other related securities in last quarter of 2012.
Contrarian Capital and York Capital gain from Lehman
Other hedge funds that have been increasing their asset base with Lehman include Contrarian Capital and York Capital. According to an update from Contratrian in a Q2 letter, the fund told investors that it was profiting from liquidations of Lehman debt. Similarly, York Capital, which is an event-driven hedge fund that specializes in distressed investments, has Lehman Brothers as its top holding of its York Total Return Fund. York Capital showed mixed performance in August in its funds. York Multi Strategy is up 7 percent YTD after a 0.8 percent decline in August. Contrarian Capital Offshore Fund, AUM $2.36 billion, was up 0.7 percent in August, but is up 8.8 percent for the year.