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Lehman Kangaroo kicked out of Aussie indices |
Lehman Brothers’ Kangaroo bond was removed from UBS indices in Australia on September 17 following Standard & Poor’s downgrading of the issuing entity, Lehman Brothers Treasury, to D. This is the first example of a Kangaroo bond entering default.
According to UBS’s index methodology bonds downgraded to a D rating “will be removed on the day following the notification of default at the (best) observable price in the market on that day…. This treatment will take precedence over index rules governing ratings changes.”
Lehman has A$600 million outstanding in the Kangaroo market in a single maturity, the 2011 bond. That bond had been removed from Yieldbroker’s multi-dealer rate sheet by the close on September 16, having been marked out to a nominal 2,771.7 basis points over swap the day before.
However, while there has been little or no trading in Lehman’s Australian dollar securities, market sources have told KangaNews that there has been significant activity in its European and US dollar paper with some investors taking out distressed sellers in the belief that bonds trading at around 30 cents in the dollar will eventually repay up to double that valuation.
Meanwhile Australia’s biggest banks have all revealed their exposures to Lehman in announcements to the Australian Securities Exchange. ANZ says its liabilities are “approximately US$120 million comprised of US$28 million exposure to Lehman Brothers Holdings and US$92 million to Lehman subsidiaries”, adding that as the latter are not part of the bank’s Chapter 11 bankruptcy filing ANZ “is not in a position at this time to provide an estimate of the likely loss, if any”.
Commonwealth Bank of Australia has declared exposures of “less than A$150 million” (US$119.91 million), National Australia bank says its respective figure is “less than A$100 million” while Westpac Banking Group may have fared best of all with a declared exposure of “less than A$10 million”.
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Last Updated ( Wednesday, 17 September 2008 )
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