Sellers of credit-default protection on bankrupt Lehman Brothers Holdings Inc. will have to pay holders 91.375 cents on the dollar, setting up the biggest-ever payout in the $55 trillion derivatives market.

An auction Friday to determine the size of the settlement on Lehman credit-default swaps set a value of 8.625 cents on the dollar for the debt, according to Creditfixings.com, a Web site run by auction administrators Creditex Group Inc. and Markit Group Ltd.

Based on the auction result, sellers of protection may have to make cash payments of more than $270 billion, BNP Paribas SA strategist Andrea Cicione said.

Lehman bonds were trading at about 13 cents on the dollar Thursday, suggesting a payout of about 87 cents was expected.

No one knows exactly how much is at stake because no central system exists for reporting trades. This lack of transparency has fed the reluctance of financial institutions to do business with each other, worsening the global credit crisis. More than 350 banks and investors participated.

The list of participants includes Pacific Investment Management Co. in Newport Beach, Calif., which manages the world's largest bond fund; the Chicago hedge fund manager Citadel Investment Group LLC; and American International Group Inc., the New York insurer taken over by the government, according to the International Swaps and Derivatives Association in New York.

"Fears surrounding the Lehman auction settlement are overblown," Bank of America Corp. credit strategist Jeffrey Rosenberg said in a note to clients Friday. "The economic impact of the Lehman bankruptcy through CDS contracts has for the most part already occurred."

Some funds may be forced to dump assets to meet the payment demands if they have not hedged, Ms. Cicione said.

"Banks can go to the Federal Reserve, or use the commercial paper market where it is still functioning," to fund protection payments, said Ms. Cicione. A 9.75-cent recovery rate would prompt payments of about $270 billion, she estimated. "But fund managers or hedge funds, once they've used their cash, have only one option: to sell assets."

The failures of Lehman, once the fourth-largest securities firm, and the Seattle thrift Washington Mutual Inc., as well as the government takeovers of Fannie Mae, Freddie Mac, and Iceland's biggest banks, have posed the biggest test to date of the 10-year-old credit-default swaps market.

Dealers last week set values for bonds of Fannie Mae and Freddie Mac. Sellers who signed up for the latter auction will pay 8.5 cents on the dollar at most because the government is backing the debt of the two mortgage-finance companies.

The Pimco Total Return Fund had written protection on $105.4 million face amount of Lehman debt as of June 30.

A unit of Primus Guaranty Ltd., a Bermuda company that has sold more than $24 billion of credit-default swaps, said last month that it had guaranteed $80 million of Lehman debt. The company sold protection on $215 million of Fannie and Freddie debt and $16.1 million on Wamu. This month, it said it also had made bets of $68.2 million on Kaupthing Bank, which has been seized by the Icelandic government.

Primus has said it has $820 million in cash and liquid investments to meet claims on the contracts.

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