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Dear Dr. Don,
How do I find information concerning Lehman Brothers
bonds and GM bonds? I have one from each company
being held in a brokerage account, and no one
can tell me the status of the bonds. If Lehman
is in bankruptcy, what happens to my money, and
why can't anyone tell me?
-- Donna Debenture
Dear Donna,
Lehman is in bankruptcy. That much is certain. The value of your Lehman bond depends on the seniority of the issue and whether the issue was backed by any collateral.
If the bond trades, your broker should
be able to provide you with a quote. Then you
have to decide if you're better off selling the
bond or waiting to see what you can get from the
bankruptcy court.
The bankruptcy court has to sort though creditors' claims on the company's assets. Again, the priority of your bond depends on its seniority and collateralization provisions. The court is likely to take upward of two years to sort things out.
Your GM bond is different. The bailout plan just formalized by the White House gives GM a little breathing room. But whether it's enough to keep the company afloat while it attempts to restructure its business is still in question.
GM's bond prices rose on the news
of the bailout package. Reuters reported that
GM's 8.375 percent bonds due in 2033 rose to 18.6
cents on the dollar, up about 3 cents.
With the GM bond, you also have to decide whether you want to sell the bond at its quoted price or accept the risk and continue to hold the bond. You could get your tax adviser involved and ask about selling the bonds at a capital loss and using that loss on your taxes.
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