While Ownit Mortgage chief executive Bill Dallas reportedly filed for Chapter 11 bankruptcy in order to shelter his employees, buyers of the subprime lender's mortgage-backed bonds that want compensation for poorly performing loans appear as though they will get the short end of the stick. Nearly all of the company's unsecured creditors are investors holding Ownit loans they say need to be repurchased for one reason or another, but it's unlikely the companies will see much compensation from Ownit, according to sources familiar with the matter.

"The claims far outstrip the equity that the company has, which is why they filed for bankruptcy in the first place," a source said. The buyback requests from the top three unsecured creditors alone account for nearly all of the top 20 such creditors. Merrill Lynch, Terwin Advisors and Credit Suisse, respectively, are collectively requesting that roughly $125 million worth of loans be repurchased. In its bankruptcy filing, Ownit estimated its assets were between $1 million and $10 million - and that it owed some $170 million to its 20 largest creditors with unsecured claims. Merrill Lynch, which bought a 20% stake in the company for $100 million in 2005 and was considered Ownit's strongest Wall Street supporter, had claimed the biggest sum of buybacks it was owed, roughly $93 million.

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