FT.com / Capital Markets – Lehman Brothers set for landmark appeal

Via FT.com / Capital Markets – Lehman Brothers set for landmark appeal:

Lawyers for the Lehman Brothers US estate will appeal against a decision by English courts that retail investors from Papua New Guinea, Australia and New Zealand should be paid ahead of the failed bank in the unwinding of a complex structured vehicle, according to people familiar with the situation.

Analysts believe the case could have important implications for the securitisation market.

“A ruling against the investors would be hugely negative for the credit markets as the concept of bankruptcy remoteness will most likely not be value for any transaction if the swap counterparty has a US connection,” said analysts at Creditsights in a report. They believed such a decision could lead to further rating downgrades for similar collateralised debt obligations and could force rating sensitive investors to sell their holdings, pushing spreads up.

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