Paulson Banking on Lehman Bonds, Reports $554M Gross Profit

Hedge fund-giant John Paulson, still licking the woulds from a massive loss on an investment in Sino-Forest (OTC: SNOFF), has now made it up.

According to the Financial Times, Paulson & Co. said it made $554 million gross on 2,000 trades in Lehman bonds, starting the day the former investment bank filed for bankruptcy in 2008.

Under a final agreement, Lehman company bondholders will receive 21.1 cents for each dollar in face value, compared with the initial proposal for 17.4 cents. Paulson holds the bonds at an average price of 7.3 cents per dollar, meaning it holds bonds worth $4 billion which the firm paid just $290 million net to acquire.

Prices for the bonds reached 26 cents last Friday, suggesting Paulson could realize as much as $780 million on the sale.

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