Ray Hendon

Barclays Will Not Pick Up Lehman ETNs

The bonds will be paid accouring to: their status with respect to other debt--some are senior, some are subordinated, etc., and subject to how much in assets are left to distribute. Also, some bonds may be tied to specific assets, such as mortgages, railroad cars, airplanes, etc. I doubt Lehman had any railroad car bonds, but they may have some that are tied to other specific assets.

Generally, I think the bond holders are just above stockholders in the long line of creditors. Both classes are probably going to take one for the team!

Ray

Barclays Will Not Pick Up Lehman ETNs

Exchange Traded Note, a financial insturment somewhat similar to an exchange traded fund, except with an ETN the value of the note is strictly limited to the credit worthiness of the sponsor. They are not protected by any of the provisions of the Investment Company act of 1940, as mutual funds and ETFs are.


Best Wishes,

Ray

Barclays Will Not Pick Up Lehman ETNs

It isn't going to help. But, they were always toxic to me. I have never understood, from an investor's point of view, what the attraction of an ETN was over the much more protected and transparent ETF.

An odd sidenote to this whole episode is that the three ETNs at question have less than $5million in assets each. In total they are just over $13Million. So there are no big enchaladas at stake.

But, the entire story hasn't been told, yet. The bankruptcy judge may arrange a sale of these assets to another buyer sometime before they are otherwise liquidated. Investors in these unfortunate insturments still have a glimmer of hope. But, had they been mutual funds or ETFs, their assets would have been protected from Lehman's failures as money managers.

Best wishes,

Ray