Lehman Brothers (LEH)

Re: Lehman LEH

Postby millionairemind » Sun Aug 31, 2008 9:37 pm

Lehman Brothers in urgent talks on capital injection
By Mark Kleinman
Last Updated: 1:27am BST 31/08/2008

The Wall Street investment bank Lehman Brothers is this weekend locked in talks with a group of foreign government-backed investment funds in an effort to secure billions of dollars in new equity capital.

The Sunday Telegraph has learned that Lehman has intensified talks in recent days with Korea Development Bank, the South Korean ­government-backed lender, about a capital injection of as much as $6bn (£3.3bn). KDB has drafted in bankers from the heavyweight advisory boutique Perella Weinberg to provide counsel on the talks, which could be concluded this week.

The acceleration of the negotiations, which Lehman wants to have wrapped up before it reports third-quarter earnings in mid-September, underlines the urgency with which one of the US banking industry's most venerable names is seeking capital.

If the talks with the Koreans fall through, Lehman is lining up alternative investment from other sources, including Citic Securities, a Chinese brokerage which was on the verge of investing in Bear Stearns before its implosion earlier this year, which resulted in a cut-price takeover by JP Morgan, another Wall Street banking group.

Lehman is also holding talks with a number of sovereign funds from the Middle East, which have been invited to participate in a capital-raising. These are understood to include investors from Abu Dhabi and Qatar.

Under the structures being discussed by Lehman executives, including Richard Fuld, the bank's chairman and chief executive, KDB could buy up to 25 per cent of Lehman, which has a market value of just $11.2bn following a slump in its share price this year.

Alternatively, if it proceeds with a deal with Citic or the Gulf investors, Lehman is likely to sell no more than 10 per cent of itself to each of those funds, but could combine it with a broader equity-raising in the open market. Fuld, who is determined to avoid a sale of the bank's prized assets at distressed prices, is understood to have assigned several of his key executives to look at different fundraising scenarios.

Other options open to the Lehman board, whose members include Sir Christopher Gent, the former chief executive of Vodafone and current chairman of GlaxoSmithKline, include the sale of part or all of its asset management arm.Lehman's so-called "crown jewel", it includes Neuberger Berman, a highly rated fund management business. Analysts have valued the division at up to $10bn.

"The preferred option is not to sell any of it unless they cannot raise enough from external investors," said a person involved in the talks. Dozens of parties, including JC Flowers and Kohlberg Kravis Roberts, have expressed an interest in the business.

Fuld is also keeping Lehman's board appraised of plans to spin off the bank's troubled $40bn commercial real estate portfolio, which may result in the creation of a separately quoted company in which Lehman Brothers shareholders would be given equity. The demerger of the real estate assets would leave the investment bank with a cleaner risk profile and remove one of the main drags on its share price.

If the Korean, Chinese or Gulf institutions proceed with an investment in Lehman, it will be the latest in a series of international banking groups to tap the Middle East and Asia for capital since the credit crisis began just over a year ago.

In the US, Citigroup, Merrill Lynch and Morgan Stanley have been the principal recipients of such capital injections, while in Europe, Barclays, Fortis and UBS have sought new capital.

Banking stocks have suffered a fresh battering on Wall Street in recent weeks following analysts' predictions that another major US financial institution will collapse.

At its earnings announcement next month, Lehman is expected to disclose further writedowns of about $4bn, to add to the $8bn in writedowns and losses already declared.


There have been suggestions in recent weeks that Lehman could become the target of a hostile takeover following the failure of an earlier round of talks with KDB and Citic. Potential buyers might include Barclays, although people close to both companies say no serious discussions have been held between them so far.

Last night, Lehman Brothers did not return calls seeking comment.
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Re: Lehman LEH

Postby millionairemind » Tue Sep 02, 2008 6:29 pm

Lehman and KDB edge closer to deal
By Song Jung-a in Seoul
Published: September 2 2008 05:46 | Last updated: September 2 2008 08:13

Korea Development Bank confirmed on Tuesday that it is in talks with Lehman Brothers about investing in the US securities company amid mounting speculation that a deal is imminent. ”Our CEO confirmed that talks are going on,” KDB said on Tuesday. But the Korean bank declined to give any further details.

Min Euoo-sung, KDB’s new chairman and a former head of Lehman in Korea, has previously said that the lender would actively seek overseas takeovers. He said the fallout from the US subprime crisis provided an opportunity for KDB.

The latest talks come as d**k Fuld, Lehman’s chief executive, faces growing pressure to raise capital ahead of the bank’s mid-September earnings report, which analysts expect could include more writedowns of $4bn.

Shares in Lehman have fallen more than 70 per cent since the beginning of the year following large writedowns on the bank’s troubled mortgage portfolios. Lehman was among the leading underwriters of mortgage-backed securities and was left with large holdings after the subprime crisis curtailed investor appetite for the fixed-income products.

Lehman is thought to be considering options to raise cash before next Wednesday, including a sale of a stake in Lehman itself or the sale of all or part of its asset management arm or its commercial real estate portfolio.

The Financial Times revealed last month that KDB had held secret talks with Lehman about buying a 50 per cent stake through a two-step process, under which KDB would buy a 25 per cent stake directly from Lehman and another 25 per cent through a market tender. However, those talks were understood to have stalled amid concerns that Lehman was asking too much for a stake.

The Financial Services Commission, Korea’s top financial regulator, said yesterday it was looking at the issue ”in a positive way”.

In July Jun Kwang-woo, the FSC’s head, said that it would be challenging to grow KDB into a global investment bank. Mr Jun said at the time that he was thinking about upgrading KDB’s investment banking capability through strategic alliances or acquisitions of global investment banks.

Korean analysts said they expected KDB to form a consortium with local commercial banks to buy Lehman Brothers particularly as Mr Jun recently warned against KDB playing a leading role in the possible acquisition, saying it would be taking on too much risk. He told reporters that such a deal should be led by private lenders.

”We set the boundary so we believe that KDB will not go against the government guideline,” the FSC said.

Dong-a Ilbo, a local daily, reported on Tuesday that Woori Financial Group and Hana Financial Group could partner KDB to jointly invest in Lehman.

However, Woori and Hana said yesterday that they had not received an investment offer from KDB or Lehman and were not planning to invest in the US firm.

Analysts said yesterday that buying a stake in Lehman would help KDB in its quest to become a global investment bank. Korea plans to privatise KDB and is preparing for an initial public offering next year.
Copyright The Financial Times Limited 2008
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Re: Lehman LEH

Postby LenaHuat » Wed Sep 03, 2008 9:51 am

It seems that HSBC and an un-named Chinese bank are also vying for LB.
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Re: Lehman LEH

Postby Chiron » Wed Sep 03, 2008 9:56 am

Maybe they all just want to make use of this opportunity to have a detail look at the book and accounting details of Lehman and use it as a guide to gauge the extent of the current financial crisis? hehe :lol:
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Re: Lehman LEH

Postby LenaHuat » Wed Sep 03, 2008 10:06 am

Ha, ha, Chiron, good idea.

But I think Asian banks are really very keen to get to 'know' American investment banks well. IBs are a different breed from consumer banks. These IB have alot of proprietary 'software' and financial modelling techniques that are difficult to develop from scratch. The Chinese and Arabic SWFs seem to be very contented with their stake in Morgan Stanley. Temasek now holds slightly more than 10% of Merrill Lynch. JP Morgan is very pleased with Bear Sterns.
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Re: Lehman LEH

Postby millionairemind » Wed Sep 03, 2008 7:04 pm

KDB made Lehman offer; HSBC may trump Koreans: report
Wed Sep 3, 2008 5:12am EDT

SEOUL (Reuters) - State-controlled Korea Development Bank (KDB) proposed buying 25 percent of Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) for up to $5.3 billion, a newspaper reported, but other Korean banks rumored to be joining a KDB bid consortium denied they were involved.

Daily Chosun Ilbo also reported on Wednesday that top European bank HSBC Holdings (HSBA.L: Quote, Profile, Research, Stock Buzz) (0005.HK: Quote, Profile, Research, Stock Buzz), several U.S. hedge funds and an unidentified Chinese bank were among other potential buyers of Lehman, the fourth-ranked U.S. investment bank.

KDB had confirmed on Tuesday it was in talks with Lehman over a possible joint investment with other Korean banks, but declined to give details of its negotiations. On Wednesday, it said it was still unsure whether there would be a deal.

"Korea Development Bank has considered M&A deals in foreign investment banks including Lehman Brothers, and asset management companies, as part of its privatization and competitiveness efforts, but nothing has been decided yet," it said in a statement.

The Chosun report quoted an unnamed financial industry source as saying KDB had sent the proposal to Lehman -- which has over $60 billion of mortgage and mortgage security exposure -- and that leading local banking groups Woori Finance Holdings (053000.KS: Quote, Profile, Research, Stock Buzz) and Shinhan Financial Group (055550.KS: Quote, Profile, Research, Stock Buzz) were seriously considering joining.

HSBC officials in Hong Kong and Seoul declined to comment.

Shinhan and Woori, whose shares were hit hard on Tuesday on concerns about the extent of Lehman's problems and their potential exposure, were quick to deny the newspaper's report.

"We have not seriously considered the idea and have no plans to do so in the future," said a spokesman at Shinhan, South Korea's second-biggest financial services firm.

Third-ranked Woori Finance also said in a statement: "We have not received any offer about the Lehman deal nor have we considered it internally." The smaller Hana Financial Group (086790.KS: Quote, Profile, Research, Stock Buzz) reiterated a previous denial

Lehman prefers KDB, whose CEO used to head the U.S. bank's South Korean operations, over other contenders as KDB plans to keep its current management after an acquisition, but the deal may fall through as KDB's bid price is considered very low, the paper said.

According to the report, KDB was offering 5-6 trillion won ($4.4-$5.3 billion) for 25 percent of Lehman and also wants a guarantee it can later increase its stake to 40-50 percent.

South Korean authorities have publicly said they are against KDB playing more than the role of a catalyst in any purchase of Lehman, preferring private banks to take the lead.

Separately, the chairman of South Korea's military savings fund told Reuters it would consider joining KDB in any bid for Lehman, as now appeared a good time for U.S. investments.

Lehman is under pressure to raise capital as Wall Street firms reel from the fallout of the subprime mortgage crisis.

The fourth-largest U.S. investment bank is looking for buyers for some $40 billion of commercial mortgages and property on its balance sheet.

Woori shares closed 0.8 percent higher, while Shinhan was off 2.6 percent. Hana Financial dropped 2.6 percent. The broader Korean share index ended up 1.4 percent.
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Re: Lehman LEH

Postby ishak » Thu Sep 04, 2008 9:11 am

For Lehman, painful choices ahead
Reuters, 04 Sep 2008

Lehman Brothers faces painful decisions ahead of its expected announcement of another big quarterly loss later this month.

Lehman has already taken US$7 billion in credit-related write-downs and losses since the start of the global credit crisis. It has raised about US$12 billion in capital this year through common equity, preferred stock and convertible securities offerings, but analysts and money managers say that may not be enough.

Lehman, the smallest of the major US investment banks, could post pretax write-downs of US$3.5 billion when it reports its third-quarter earnings, according to a Morgan Stanley analyst.

Lehman may have been dealt another blow on Tuesday, when hedge fund Ospraie Management LLC, in which it owns a 20 per cent stake, said it will close its flagship fund due to losses - a move that could affect the value of Lehman's investment management business. A full or partial sale of the unit could be one option for raising capital.

Lehman has been weighing several possibilities to get through the crisis - shedding problem assets, selling individual businesses, or a stake in the parent company.

But none of the choices are easy. Problem assets, such as its commercial real estate-related investments, may find buyers, but only at low prices.

Merrill Lynch & Co Inc discovered that in July, when it sold a US$30.6 billion portfolio of repackaged debt for 22 cents on the dollar.

Other alternatives, such as raising equity capital, can be painful for existing shareholders, whose investments would be diluted. Selling businesses such as its asset management unit, which includes prized fund manager Neuberger Berman as well as stakes in several hedge funds, could hurt Lehman's earnings prospects.

In the end, money managers said, Lehman may have to do a bit of each.

'There is no optimal solution here,' said Walter Todd, principal at Greenwood Capital Associates. 'Depending on how much capital they need to raise, utilising several of these options would probably be the best avenue for them.'

Lehman declined to comment.

Difficult choices
Lehman has not detailed its plans, but according to sources, the bank is looking at various options, including seeking buyers for commercial mortgages and property on its balance sheet. It also may shed about 1,200 jobs, or roughly 5 per cent of the work force, in its latest round of cost cutting.

At the same time, it is weighing the sale of part or all of its asset management business, including Neuberger Berman. It is in talks with state-controlled Korea Development Bank over a possible investment in the overall business.

One portfolio manager said a rights offering in which existing shareholders can buy additional shares would be the better way to go if the company has the time to do so.

Otherwise, a stake sale to a large investor like the Korean bank would be preferable to selling Neuberger Berman, which Lehman bought for about US$3.1 billion in 2003.

'Another equity infusion will probably do well for them, which will allow them to more aggressively address some of the problems that are in the investment portfolio,' said Peter Kovalski, portfolio manager at Alpine Woods Capital Investors, which owns Lehman shares. 'You'd hate to see them sell a good asset.'

But an equity infusion alone may not be enough. The company may have to sell at least part of the asset management business as well, an analyst said.

'It provides a real nice, consistent revenue stream for the company. So you are only going to sell that if you absolutely have to,' said Bill Fitzpatrick, an equity analyst at Optique Capital Management. 'But it appears as though at this point that is indeed necessary.'

Lehman is likely to have less leverage in negotiating a good price, even for its good assets. 'They are in a bad situation because people know they are in distress,' said Greenwood's Todd, a former Lehman banker.

Roller-coaster
Lehman has not been alone in feeling pain during the credit crunch.

A Wachovia analyst said in a research note on Tuesday that the third quarter will be a 'quarter to forget' for Wall Street investment banks. Wachovia slashed its estimates for Goldman Sachs Group Inc, Morgan Stanley as well as Lehman.

'The overall industry has continued to surprise on the downside with problems,' Alpine Woods' Kovalski said.

Lehman shares are down about 75 percent this year, requiring the company to repair relationships with key employees whose stock holdings have tumbled in value, Ladenburg Thalmann analyst Richard Bove wrote in a note last week.

The management needs to take decisive action, or it could become the target of a hostile takeover, Mr Bove wrote.

'It's going to be a roller-coaster for Lehman,' Mr Fitzpatrick said. 'But I do think they make it out of this.'
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Re: Lehman LEH

Postby millionairemind » Fri Sep 05, 2008 9:21 am

Lehman May Shift $32 Billion of Mortgage Assets to `Bad Bank'
By Yalman Onaran

Sept. 4 (Bloomberg) -- Lehman Brothers Holdings Inc. may shift about $32 billion of commercial mortgages and real estate to a new company that will be spun off in a move similar to the good-bank-bad-bank model used in the 1980s banking crisis, two people briefed on the discussions said.

The bad bank, nicknamed Spinco for now, would have about $8 billion of equity coming from Lehman, the people said, speaking on condition of anonymity because the plan is one of several under consideration. Spinco would borrow the remaining $24 billion from Lehman or outside investors. The New York-based bank would replace capital put into Spinco, whose shares would be owned by current Lehman shareholders.

Lehman Chief Executive Officer Richard Fuld, 62, is under pressure to strip the firm's balance sheet of hard-to-sell assets. To raise cash needed to cope with losses from a wholesale disposal, Lehman has been talking with Korea Development Bank about a capital infusion and with private equity firms interested in buying its asset-management unit.

``The model helps banks get on with their real business, focus on their strengths, after they put the bad assets aside,'' said Michael Bleier, an attorney at Reed Smith LLP who was the senior counsel to Bank Mellon during its spinoff of bad assets in 1988. ``We'll see it being used again during this crisis.''

Mark Lane, a spokesman for Lehman, declined to comment.

Korea Talks

The Spinco proposal would enable Lehman to dispose of 80 percent of its commercial mortgages, the people said. Under another plan, the firm would establish a company capitalized and managed by outside investors to buy some of its mortgage assets. The Spinco plan would enable Lehman's shareholders to benefit from a turnaround in the mortgage market.


Korea Development Bank has been in discussions to buy a 25 percent stake in Lehman for $6 billion, according to the people familiar with the talks. That would replace most of the capital Lehman would put into the bad bank.

The deal must be structured to guarantee enough cash flow from the mortgages being put into the spun-off entity to repay outside lenders, Reed Smith's Bleier said. That would force Lehman or another bank using the model to disclose much more detail about the mortgages and the securities, he said.

Balancing Act
Lehman's $65 billion mortgage-related portfolio has spooked shareholders, driving the stock price down 77 percent this year on concern that the $2.8 billion loss in the second quarter wouldn't end the bleeding. The bigger portion of the portfolio, or $40 billion, is tied to commercial real estate.

Even though defaults of commercial mortgages are still below 1 percent, speculation that delinquencies will jump in that market has pushed down the prices of the bonds backed by commercial real estate loans. By spinning off the mortgages to its own shareholders, Lehman can allow them to benefit from a possible recovery in asset prices when investors realize commercial mortgages aren't going the way of subprime.

``Management's challenge is not that of discarding a troubled portfolio,'' said David Trone, an analyst at Fox-Pitt Kelton Cochran Caronia Waller. ``Instead, management must find a way to relieve pressure on the stock without destroying shareholder value by succumbing to an unwarranted fire sale of commercial mortgages.''

KKR, Carlyle

Lehman, the largest underwriter of mortgage bonds last year, has been trying to reduce assets linked to that market as demand dried up and prices plummeted, generating more than $8 billion in writedowns and credit losses. BlackRock Inc., the largest publicly traded U.S. money manager, was considering a purchase of some of Lehman's commercial mortgages, people familiar with those discussions said last month.


If talks with the Korean bank fail, Lehman will turn to the other option for raising capital, the people familiar with the firm's plans said. Private-equity firms including Kohlberg Kravis Roberts & Co. and Carlyle Group have been negotiating to buy a stake in Lehman's asset-management business, which includes Neuberger Berman Inc.

Fuld removed his associate of 30 years, President Joseph Gregory, 56, in June and replaced him with Herbert ``Bart'' McDade, 49, who had run fixed income and equities. Fuld, McDade and other members of the management team are racing to conclude a deal with potential investors before the firm reports earnings this month, people familiar with the situation have said. The company typically announces earnings in mid-September, although last quarter it released preliminary figures a week before schedule.

The mortgage-bond crisis that spread to Lehman escalated in June 2007, when Bear Stearns Cos. began liquidating holdings from one of its hedge funds after losing bets on securities tied to subprime mortgages. Bear Stearns, then the fifth-largest U.S. securities firm, sold itself to JPMorgan Chase & Co. for $10 a share.
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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Lehman LEH

Postby ishak » Sat Sep 06, 2008 2:06 am

Lehman weighs real estate spinoff
Reuters, 05 Sep 08

Lehman Brothers Holdings is considering a plan to put some $32 billion of its commercial real estate and mortgage assets in a new company and spin it off, Bloomberg reported on its website on Thursday.

Under the plan, similar to a good-bank-bad-bank model, Lehman will put in about US$8 billion of equity in the new company, the news agency said, citing unnamed sources.

The remaining US$24 billion will be lent to the new company by Lehman or outside investors, it said. Shares of the company would be owned by Lehman's current shareholders, it said.

The plan is one of several being considered, it said. Under another plan, Lehman would set up a company funded and run by outside investors to buy some of these assets, it said.

Lehman declined to comment.

Lehman, the smallest of the major US investment banks, has not detailed its plans, but according to sources, the bank is looking at various options, including seeking buyers for commercial mortgages and property on its balance sheet.

At the same time, it is weighing the sale of part or all of its asset management business, including Neuberger Berman, sources have said previously. It is also in talks with state-controlled Korea Development Bank over a possible investment in the overall business.

Earlier on Thursday, Fox-Pitt Kelton analyst David Trone wrote in a research note that Lehman Brothers should consider spinning off its commercial mortgage securities and loans portfolio to shareholders instead of selling it.

A simple spinoff of the commercial mortgage securities and loans portfolio would ensure that shareholders have the option of owning two entities or keeping only the core Lehman stock, Mr Trone said.
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Lehman LEH

Postby ishak » Sat Sep 06, 2008 2:46 pm

Japan's Nomura mulls investing in Lehman
Reuters, Sep 6, 2008

Japan's Nomura Holdings Inc is considering acquiring a stake in U.S. investment bank Lehman Brothers, the Japanese daily Yomiuri Shimbun reported on Saturday.

Nomura has a pool of funds exceeding 200 billion yen ($1.86 billion) for investing in or acquiring U.S. and European financial institutions, the Japanese brokerage's chief executive, Kenichi Watanabe, told Yomiuri in an interview.

Watanabe said Lehman was one of several candidates and that Nomura would decide whether to make an investment offer after confirming Lehman's business results, which could come as early as next week, and after checking share price moves.


"We are always considering a number of possible business moves," Nomura spokesman Eiji Miura told Reuters, but declined to comment further.

The state-controlled Korea Development Bank [KDB.UL] has also said that the subprime mortgage-hit Lehman was a possible acquisition target.

Japan's Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) earlier this week denied a media report that it may bid for a stake in Lehman.
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