'Lehman Bondholders Get Little Insight on Price From CDS Auction' Tiffany Kary Oct 11 http://www.bloomberg.com/apps/news?pid=20601087&sid=a94veNnxI0NI&refer=home [edited] " bondholders didn't get a clear indication of how much they will recover in the firm's bankruptcy from an auction of insurance on its debt " The auction has little to do with what bondholders will recover once Lehman's bankruptcy has been fought out in court by creditors " The payout by Lehman will mark the largest ever as sellers of the insurance are expected to deliver $270 billion." Lehman $9 trln i-rate swap portfolio unwound - LCH http://www.reuters.com/article/bondsNews/idUSN08132520081008 "Lehman's interest rate swap portfolio comprised 66,390 trades across 5 major currencies LCH. Clearnet said in a release."
not cds but interesting Oct 17: Lehman To Unwind 1.5M Deriv. Trades Riley McDermid, Senior Reporter "Lehman Brothers Holdings Inc. said in a court hearing Thursday that it will attempt to unwind more than a million derivatives trades outstanding since the bank's collapse, after a lawyer for the bankrupt firm said it is only now emerging from the âchaosâ that followed its implosion last month. During the hearing at the U.S. Bankruptcy Court in Manhattan, Lehman lawyer Harvey Miller told the court that the firm's legal and financial team will need to hire around 210 financial professionals to help disentangle the bank from the trades." http://www.marketsmediaonline.com/news_details.htm?wP=1&wPI=1&cN=2022
These CDS are nothing more then illegal insurance and just like any illegal gambling ring, the authorities need to step in and declare them illegal and the holders of the CDS are out of luck. Just like if you buy a lottery ticket from an illegal lottery. I don't see the big problem here.