Reuters – Investors who bought protection against a Lehman Brothers default in the credit default swaps market have little to worry about getting paid on Tuesday, when an estimated $8 billion in cash payments on Lehman CDS come due.
While these payments may push a few fragile hedge funds over the edge, analysts say, stringent collateral requirements mean most protection buyers will not be out of pocket.
Comment has circulated in the markets and in the media that CDS counterparties may not be able to come up with the cash.
"The big issue is whether they (CDS) will be settled successfully," wrote ING rate strategist Padraic Garvey on Friday. "The talk is that hedge funds sold protection on Lehman … well now they will have to cough up."
