Bankruptcy claims trading at record high in April

By Emily Chasan

NEW YORK (BestGrowthStock) – Trading of creditor claims from U.S. bankruptcy cases reached a record $3.65 billion in April as new details on Lehman Brothers’ reorganization plan boosted trading activity.

A monthly survey from SecondMarket, which runs a trading platform for bankruptcy claims and other illiquid assets, on Tuesday showed that a total of 1,086 claims with a face value of $3.65 billion changed hands last month.

The amount of claims traded surpassed the previous recorded high of $3.3 billion claims traded in 2009.

Bankruptcy claims trading lets creditors with claims against bankrupt companies sell their interests to investors before the conclusion of a bankruptcy case.

Claims in bankrupt U.S. investment bank Lehman Brothers Holdings Inc (LEHMQ.PK: ) led trading in April, as about 268 claims worth about $3.19 billion were transferred, SecondMarket said.

Last month Lehman Brothers filed its disclosure statement that detailed its reorganization plan and estimated recoveries to creditors of the company, which filed the largest U.S. bankruptcy in history in September 2008.

“The disclosure statement came out and the views on estimated recoveries were fairly conservative,” said Chris Moon, director of the bankruptcy claims market for SecondMarket. “I think the guys who were buying (Lehman claims) had a number in mind where they were comfortable buying.”

Lehman has said certain unsecured creditors could recover between 15 percent and 27 percent of their claims.

Packaging maker Smurfit Stone Container Corp (SSCCQ.PK: ) and petrochemicals producer Lyondell Chemical Co (ACCELC.UL: ) were also among the most actively traded, as Smurfit said last month that many of its creditors backed its reorganization plan, and Lyondell exited bankruptcy protection.

“When a plan comes out, whether its an initial or revised plans, you may see more selling because (creditors) are getting a good sense of what their recoveries are going to be and may ultimately be more willing to cash out of a claim now,” Moon said.

Claims against Mesa Air Group also traded for the first time in April, after the company filed for bankruptcy in January. Claims typically begin trading a few months after a company’s bankruptcy has been filed as creditors get a clearer picture of potential recoveries.

Despite a recent lull in new filings, Moon said restructuring experts are expecting to see bankruptcy filings pick up again later this year and into next year.

“I don’t think we’re anywhere near the end of this cycle of bankruptcy filings,” Moon said.

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(Reporting by Emily Chasan; Editing by Steve Orlofsky)

Bankruptcy claims trading at record high in April