Hedge-fund manager John Paulson generated $4 billion playing against subprime mortgages, the market that in the end assisted in destroying Lehman Brothers (LEHMQ). Now, his fund, Paulson & Co., is positioned to rake in hundreds of millions picking from the investment bank’s remains.
According to a WSJ report, Mr. Paulson’s fund has been grabbing Lehman debt at a sharp discount since the day the investment bank collapsed, betting prices would go up while panicked investors fled. Now, as Lehman’s estate prepares to wind down, Mr. Paulson’s fund could collect profits between $350 million and $726 million on the Lehman trades.
Over the last 30 months, Mr. Paulson’s fund has invested in over $7 billion worth of Lehman bonds in about 1,800 transactions, the Journal said. The average cost of those trades was just 13 cents on the dollar.
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