Lehman Investment Opportunity Note (LION)

What Was a Lehman Investment Opportunity Note (LION)?

A Lehman Investment Opportunity Note (LION) was a type of zero-coupon Treasury bond issued by the U.S. government through the Lehman Brothers brokerage from the mid-1980s until the bankruptcy of Lehman Brothers in 2008. Lehman Investment Opportunity Notes (LIONs) were made as a set of "cat" investments by brokerage houses as another type of security that separated principal and interest, and the notes were issued at a discount from the face value.

LIONs were zero-coupon bonds, and that means that they made no interest payments to bondholders. All things being equal, investors brought in money in light of the fact that the par value they received back at maturity of the bond was more than the discount price they had paid for the bond.

Understanding the Lehman Investment Opportunity Note (LION)

A Lehman Investment Opportunity Note (LION) was essentially a U.S. Treasury bond issued through the brokerage Lehman Brothers. This was one of another type of bond that didn't join principal and interest since it paid no interest, and on second thought was sold at a discount and afterward paid par value, or face value, when reclaimed at maturity.

This zero-coupon bond was offered through Lehman Brothers as a LION but at the same time was offered through other brokerage houses under various names. The brokerage house held the real Treasury bond in escrow, took the interest payments and utilized them to separate the bonds, and issued new bonds with zero-coupon to investors. This was called coupon stripping. Since these bonds were Treasury-backed, they were no-risk investments.

The LION was a sufficiently fruitful investment vehicle that the U.S. Treasury issued its own form, Separate Trading of Registered Interest and Principal of Securities (STRIPS) in 1986. LIONs kept on being traded on the secondary market and stayed famous due to their lack of risk.

During the financial crash of 2008, Lehman Brothers petitioned for Chapter 11 bankruptcy.

The Felines

The 1980s saw a rise in abbreviations for financial instruments, and zero-coupon bonds took this trend to the extreme. Somewhere in the range of 1982 and 1986, LIONs were issued by Lehman Brothers, TIGRs (Treasury Investment Growth Receipts) were issued by Merrill Lynch, and CATS (Certificates of Accrual on Treasury Security) were issued by Salomon Brothers. Together, these were nicknamed the cats, since they all had names of individuals from the cat family.

In 1986, the U.S. government presented its own direct form of a zero-coupon bond called STRIPS. This successfully delivered the previous private issues obsolete, despite the fact that they actually traded on the secondary market until Salomon Brothers was subsumed into Citigroup in 2003 and Lehman Brothers petitioned for Chapter 11 bankruptcy during the crash of 2008 and quit existing.

Features

• Lehman and different brokerages would hold the Treasury bonds in escrow, take the interest payments, separate the bonds, and issue new ones with no interest rates paid out to investors.
• A Lehman Investment Opportunity Note (LION) was a government security issued by Lehman Brothers during the 1980s through the company's bankruptcy in 2008.
• Different brokerages likewise sold government-backed zero-coupon bonds, yet they were marketed under various names.
• Not at all like different bonds, a LION was not a mix of principal and interest, as it didn't pay interest; all things considered, it was sold to investors at a discount and paid face value at maturity.
• LIONs and other such bonds were famous in light of the fact that they were backed by the government, and subsequently no risk to the investor.