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Third Avenue Focused Credit Fund's Bet On Lehman Brothers Paying Off

Readers of some of my past articles (like this one: 10% Return In Q1 For 'Savvy Senior' IRA - Now What ...) know I'm a big fan of the Third Avenue Focused Credit Fund (TFCIX and TFCVX), which is a high-yield bond fund that focuses on distressed debt and other opportunistic credit investments. In fact, it is the only open-end mutual fund I own, with my other holdings being closed end funds or direct equity investments. One of its biggest holdings is Lehman Brothers debt.

I was happy to see an item in the Seeking Alpha "Wall Street Breakfast: Must Know News" this morning that Lehman Brothers is making an additional payment to creditors, and that its overall payment to creditors is now likely to exceed initial expectations. This will benefit hedge funds and other distressed debt buyers (like Third Avenue) who have been accumulating Lehman's debt at pennies on the dollar ever since its collapse.

Here's the Seeking Alpha blurb, as well as the article in Reuters:

Lehman Brothers will pay out an additional $17.9B to creditors, its fifth distribution since a judge approved the failed investment bank's liquidation plan in December 2011, and bringing the total doled out so far to more than $80B - $15B higher than its initial estimate of how much would be paid to creditors. While much of this most recent distribution involves money Lehman entities owe to one another, the outlook for creditors keeps improving. Those holding bonds issued by the Lehman parent company are now expected to get 26.9 cents on the dollar vs. an earlier estimate of 21.1 cents. For hedge funds who have spent years buying Lehman debt at big discounts, an increase of just a few cents means millions in profits.

The Third Avenue Focused Credit investment continues a favorite theme of mine, which is that retail investors can find ways to make the sort of investments and returns typically only available to professional institutional fund managers, if we look hard enough. Third Avenue Focused Credit is one of those.