Sunday, September 14, 2008

Lehman derivates to be netted

"ISDA confirms a netting trading session is taking place between 2 pm and 4 pm New York time today for OTC derivatives. Product classes involved are credit, equity, rates, FX and commodity derivatives. The purpose of this session is to reduce risk associated with a potential Lehman Brothers Holding Inc. bankruptcy filing. Trades are contingent on a bankruptcy filing at or before 11:59 pm New York time, Sunday, September 14, 2008. If there is no filing, the trades cease to exist."

Here's a 30 second summary:

What are the values of these swaps? It depends on the "netting" counterparty-Just cut out Lehman. What if the hedge fund that sold the swaps, have funding by Lehman? In any event, the worst case would be Delphi, where they got 37% of face. A good read is here:

AIG, before the opening, is going to announce plans for a $10 billion raise; and the sale of it's Aircraft leasing, ILFC and some insurance operations.

So Lehman's burnt toast. The known unknowns, Merrill Lynch and AIG, look to have taken themselves out of the short's cross hairs.

What are they going to do next? Raid $2 WaMu?

Tomorrow morning crude will be under $97, and those who bought MER and AIG live to play again!

I'll take it!

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