Yalman Onaran – “Lehman to Announce `Strategic Initiatives’ Tomorrow”


Lehman to Announce `Strategic Initiatives’ Tomorrow

Yalman Onaran | September 9, 2008

Lehman Brothers Holdings Inc. said it will announce third-quarter results and “key strategic initiatives” tomorrow, a week earlier than planned, after the stock fell a record 45 percent in New York trading today.

Lehman, the fourth-largest U.S. securities firm, said in a statement that it will report the results at 7:30 a.m. in New York. The company said it will host a conference call at 8 a.m. to discuss the firm’s performance, “outlook and strategy.” Lehman previously said it would release the figures on Sept. 18.

Led by Chief Executive Officer Richard Fuld, Lehman has been negotiating with potential investors about obtaining a capital infusion and selling devalued mortgage assets that contributed to the firm’s $2.8 billion loss last quarter. Lehman’s shares fell $6.36 to $7.79 today in New York after talks with Korea Development Bank ended. The stock has plummeted 88 percent this year, and analysts predict the firm will report more writedowns and losses tomorrow.

The lack of a deal “is depressing shareholders and infuriating insiders,” Richard Bove, an analyst at Ladenburg Thalmann & Co., wrote in a report today. The bank “refuses to take what it believes are fire-sale prices for its key assets,” he said.

Korea Development is one of several companies that Lehman has been in discussions with in recent weeks, a person familiar with the matter said today, declining to name the other potential bidders. Lehman is also continuing talks with private-equity firms interested in buying its asset-management business, the person said.

Depleted Capital

Mark Lane, a Lehman spokesman in New York, and Korea Development Bank spokesman Cho Hyun Eek declined to comment.

Lehman plans to disclose how much of its mortgage holdings it managed to dispose of during the quarter and will spell out how it’s replacing capital depleted by losses on those assets, people familiar with the matter said before the firm issued the statement.

The company is trying to raise capital and shed real-estate assets after $8.2 billion in writedowns and credit losses in the past year. Korean regulators told the development bank it would be “inappropriate” to pursue a Lehman acquisition. Nomura Holdings Inc., Japan’s biggest investment bank, may join bidders seeking a stake in Lehman, the Yomiuri newspaper cited Nomura President Kenichi Watanabe as saying last week.

HSBC Holdings Plc, Japanese banks, and Blackstone Group LP are also among potential bidders for Lehman, said Bove. Nomura spokesman Michiyori Fujiwara and David Hall, a spokesman for HSBC, declined to comment. Takashi Miwa, a spokesman for Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, said the firm isn’t considering a bid for Lehman.

Rivals Show Support

The Wall Street investment bank has been in talks with Kohlberg Kravis Roberts & Co., Carlyle Group and other private- equity firms interested in buying its asset-management unit, which includes fund manager Neuberger Berman.

Merrill Lynch analyst Guy Moszkowski said in a report yesterday that Lehman may report a loss of $6.50 a share, wider than his earlier third-quarter loss estimate of $3.94. Oppenheimer & Co. analyst Meredith Whitney predicted Lehman will take a $4 billion writedown on residential and commercial mortgages and leveraged loans.

Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co., the three biggest U.S. securities firms, said today after the close of regular trading in New York that they weren’t backing away from their smaller rival.

“Goldman Sachs is a willing counterparty to Lehman Brothers across all our businesses,” said Michael DuVally, a spokesman for Goldman. Spokespeople for Morgan Stanley and Merrill said their firms continue to trade with Lehman.

Citigroup Inc., the biggest U.S. bank by assets, UBS AG and Credit Suisse Group AG, the two largest Swiss banks, and BlackRock Inc., the biggest publicly traded U.S. fund manager, said they too continue to do business as usual with the firm.

`Sound’ Liquidity

Standard & Poor’s said it may lower its A1 long-term rating on Lehman because the “precipitous decline” in the share price creates uncertainty about the firm’s ability to raise additional capital. S&P said Lehman’s liquidity is “sound,” noting the firm has the ability to borrow from the Federal Reserve.

Fed spokeswoman Michele Smith declined to comment on Lehman. Treasury spokeswoman Jennifer Zuccarelli said, “We are monitoring markets and in regular contact with market participants.”

Christopher Cox, the chairman of the U.S. Securities and Exchange Commission, is also staying abreast, according to agency spokesman John Nester.

“Chairman Cox and top SEC officials are monitoring market developments and are in ongoing contact with market participants,” Nester said

Fuld, 62, shuffled the top ranks of his firm for the third time in four months over the weekend. Jeremy M. Isaacs, head of Lehman’s international operations, and Andrew Morton, the fixed- income chief, are leaving. Fuld replaced his associate of 30 years, Joseph Gregory, in June, naming Bart McDade as president.

Published in: on September 10, 2008 at 9:43 PM  Leave a Comment  

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