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Monday, September 15, 2008

Bill Gross: Gets Caught on Lehman Bankruptcy

Finally. Bill Gross gets caught balls out…

Don’t get me wrong, I’m definitely not happy that real losers will be the pension funds that invest with Pimco and by extension innocent retirees… BUT, Bill Gross has been playing with fire. His recent bets have been MASSIVE, very CONCENTRATED and rely exclusively on TAXPAYER FUNDED BAILOUTS to work out.

I wrote about this is Bill Gross: Big Bet, Big Fail? He got made whole on the Fannie Mae and Freddie Mac bailout.

Not this time. The bankruptcy of Lehman (LEH) sticks Billy with $143 billion of bonds that are expected to result in about $86 billion in losses.

Pimco, Vanguard Are Biggest Bond Fund Losers in Lehman Collapse: “Pimco Advisors LP, Vanguard Group Inc. and Franklin Advisers Inc. are among the investment companies that will face losses of at least $86 billion stemming from the collapse of Lehman Brothers Holdings Inc., the biggest bankruptcy in history.

Mutual fund companies' filings show they hold more than $143 billion of bonds, led by Newport Beach, California-based Pacific Investment Management Co., manager of the world's biggest bond fund, and Valley Forge, Pennsylvania-based Vanguard, according to data compiled by Bloomberg as of June 30.

While bond investors will recover different amounts based on their ranking in Lehman's capital structure, models of credit default swaps assume lenders will recoup 40 percent of their loans overall in a bankruptcy. Investors may receive less than that, based on prices for Lehman's senior bonds of as little as 35 cents on the dollar from market reporting system Trace.

Pimco holds Lehman bonds in at least 12 of its funds, including the $134 billion Total Return Fund. Bill Gross, manager of the fund and co-chief investment officer of Pimco, was buying Lehman bonds as recently as June, Bloomberg data show.”

10 comments:

SoldAtTheTop said...

Excellent!

I too feel sorry for the fund losers but Bill Gross needs a good whooping!

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