Lehman Debt Trades Slump in April After Record Date for Payment

Trading in Lehman Brothers Holdings Inc. debt shrank in April to around one-sixth of its peak this year when investors jockeyed to buy the defunct investment bank’s debt before the record date for its first payment to creditors, a report said.

Volume in Lehman debt, which has fueled the market where traders buy and sell claims of distressed companies, dwindled to $1.3 billion last month, from $6.4 billion in the 30 days before the March 18 record date, SecondMarket Holdings Inc. said in the report released today. Lehman set a $22.5 billion payment for April 17, or 53 percent more than it previously estimated was possible.

April trading in debt of bankrupt companies was the lowest since February 2010, said SecondMarket, which tracks bankruptcy filings on transfers of claims.

Lehman debt trades eclipsed transfers of other companies’ claims even at last month’s low rate. The MF Global Inc. brokerage was the second most actively traded company, with around $157 million of its debt changing hands. The amounts refer to the face value of the claims, not the trading prices, which reflect payment prospects and aren’t disclosed.

Once the world’s fourth-biggest investment bank, New York- based Lehman filed for bankruptcy in 2008 listing debt of $613 billion. MF Global Holdings Ltd. (MFGLQ), the brokerage’s parent company, filed the eighth-largest U.S. bankruptcy on Oct. 31 with debt of almost $40 billion.

The Lehman case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net