Lehman recovery rate set at 8.625%

A final value of 8.625% was set on the bonds of Lehman Brothers today, in an auction intended to cash-settle credit default swap (CDS) trades linked to the toppled dealer.

Over 350 firms participated in the auction protocol, according to the International Swaps and Derivatives Association.

The final price is about four points lower than that for Lehman’s actual defaulted debt, according to Morgan Stanley. It means protection sellers will pay 91.375% of par to settle defaulted CDSs referencing the firm.

“Since Lehman’s bankruptcy, the market has been pricing in increasingly lower recovery value for Lehman bonds, so today’s final price should not be a surprise to

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