My question is how Lehman bonds only get 9 cents on the dollar. I know most of Lehman’s assets probably went to the secured creditors, but at least nominally Lehman had equity of almost $20 billion when it declared bankruptcy and (I think) unsecured creditors were owed about $150 billion. So we’d have to be talking about $155 billion in losses on its assets to leave only $15 billion for the unsecured creditors—and it’s hard to imagine there was anything close to that.
Simple.
There’s a lack of bidders with deep pockets out there.
Think about all the banks with balance sheet problems already. They’re hoarding cash. They have enough crap paper of their own - what do they want with someone else’s crap paper?
So it gets lowballed - and then some.