Monday, September 15, 2008
How Much is Lehman Senior Unsecured Bonds Worthing
The 10 y Leh bond traded at ~30-35 cent per dollar as of Sept 15th, dropping from 85 cent a few days ago. The company capital structure as of Q2 08 are equity: 26 bil junior subordinate bond: 5 bil subordinate bond : 12.6 bil senior unsecured: 110.5 bil To justify the value of 35 cent, the company assets must be marked down by at least 26 + 5 + 12.6 + 110.5*(1-0.35) = 115.4 bil Currently, the book value of total asset is around $639.4 bil, where the risky exposure as of Q2 08 is worth around 60 bil, including CRE and Alt-A. Risky exposure might fire-sold at 50% discount while the rest might be sold at 80-90%. So the loss range from 88 bil to 150 bil (0 - 60 c).