The secondary market for bankruptcy claims grew about 6% in 2011, with about $36 billion in face value of claims changing hands, according to the latest report from SecondMarket, which runs a forum for trading such claims.
That figure ignores one “anomalous $6.7 billion trade” made in the third quarter of 2010, the report said. But while the value of claims traded increased in 2011, the number of individual transfers hardly budged, increasing by only 49 transfers from 2010, to a total of 11,352.
Bankruptcy claims trading in 2011 was more sporadic than in 2010. While there were fewer large Chapter 11 filings in 2011 compared to 2010, the report said, the total liabilities of new filings nearly doubled in 2011, driven largely by MF Global on Oct. 31 and American Airlines on Nov. 29. Those two cases alone reflect $69 billion of total liabilities, more than all of 2010 combined.
Still, trades in claims on Lehman Brothers continued to dominate the market, representing 90% of dollar volume traded in 2011. Lehman Brothers Holdings Inc. saw 6,155 transfers, totaling $32 billion, leading all cases in both number of transfers and face value traded. Lehman’s broker-dealer arm, Lehman Brothers Inc., was the third most actively traded case, with more than $332 million in face value traded.
December saw near-peak trading volume for the year, with $3.76 billion of face value traded, an increase of 54% from November’s totals.
SecondMarket began tracking 21 new cases in December, with cumulative liabilities of more than $4.1 billion. MF Global saw its first claims trades in December, with four transfers totaling about $950,000.
Washington Mutual re-entered the top-10 list for the first time since May, with seven transfers totaling $15.4 million. The company filed its seventh amended Chapter 11 plan on Dec. 12, under which unsecured claimholders will receive a full recovery. A confirmation hearing is scheduled for Feb. 16.
W.R. Grace reappeared as one of the most actively traded cases in December. Thirty-two of its 40 transfers involved one particular creditor selling claims it had acquired throughout the year, according to SecondMarket. The specialty-chemicals company’s long-running Chapter 11, linked to thousands of asbestos lawsuits, is still awaiting approval of a reorganization plan from the U.S. District Court after receiving bankruptcy court approval last January.
Real Mex Restaurants was one of the most actively traded cases for the second consecutive month. The company is in the process of selling its assets via a Section 363 sale. The auction is set for Feb. 2. – John Bringardner