Lehman Brothers to Announce Takeover/Buyout – GSE Bailout Lawsuit Filed
Monday 9-8-08 11:30am PST:
If you have been following the Lehman saga on YourMortgageOrYourLife.com you would have known that last week. The best Lehman analysis is right here.
This week look for Lehman Brothers to submit to a ‘friendly” takeover from a company of their choosing. This is the only preferable alternative to the risk Lehman faces from “unfriendly” takeovers that would have consequences far out of their ever shrinking sphere of control.
So far I have been a few days ahead of everyone else on this Lehman story – check out the last three weeks of stories posted here, and match them up the big guys to see who has been calling Lehman’s fate first.
Help spread the word – send the link to your contacts. I called the Lehman bounce last week. I like blogging but I need a job that pays… Please contact me: anthonymfreed@gmail.com
9-5-08 12:47pm PST: Abe Kim, analyst with the Eurasia Group who has been closely following the KDB interest in Lehman, said in an interview this afternoon that the Korean Government probably will not allow a Lehman deal to go through based on the unmeasured risk involved in any such deal.
When asked if Lehman CEO Dick Fuld would be able to pull off a deal in time to save his job, Kim replied, “This is a tough deal a lot of people are leery about jumping in with Lehman.”
FauxBiz has also reported that Dow Jones has announce Lehman Brothers intention to cut an additional 1200 jobs – announcement to follow on Monday, This would be the fourth round of layoffs for Lehman in recent months.
I welcome this one if it’s true – with complete sympathy for those who will lose their jobs, of course – this may be evidence that one of the dozens of rumors floating around about a deal in the works could have some credence to it. Keep checking back here for up to the minute reports on Lehman.
Also of Note: Lehman Brothers Analyst Michelle Meyer predicts “inflation will moderate” allowing the FED to begin cutting rates at their next meeting. She was surprised the unemployment rate would increased as much as was reported yesterday, but says it is not unusual.
“We have not seen the peak in the unemployment level yet,” Meyer said. She also offered that the “GDP will probably contract in the fourth quarter,” followed by sluggish growth in 2009.
While The ECB Held Rates Unchanged – wisely keeping their eye on the old inflation ball – something the FED has been able put out of mind completely.
FauxBiz reports latest rumors – Private Equity groups KKR (Kohlberg, Kravis, Roberts & Co.) and The Blackstone Group have joined the Lehman feeding frenzy today looking to pick up Lehman’s real estate and asset management units. Always nice how these anonymous rumors turn the market around – any wonder why there is a new one every day? Smell that smell? More to follow…
Blackstone, KKR may buy Lehman assets – that is all the rumor story says so far. Lehman has cried wolf one too many times now… Something substantial better come of this or confidence in Lehman and Dick Fuld will reach an all time low next week. Also of interest is how much Merrill is tracking Lehman today, and in the graphs below. As I have been saying, there is a lot riding on Lehman Brothers, especially for Merrill Lynch. Nice bounce…
(9-5-08 Bounce)
(9-8-008 Flop)
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Orginally Posted 9-4-08 – I called the Lehman bounce…
I like blogging, but I need a job that pays. anthonymfreed@gmail.com
Could this be Lehman’s Final Throes? Time is literally running out on Dick Fuld and the Lehman Brothers crew, as rumors of a rescue by the EBA (Every Bank in Asia) evaporated, and the Days Trading Turned Dim. To me, risky maneuvers reek of panic and desperation:
Lehman Brothers, the ailing Wall Street bank, is working toward a radical solution in its fight for survival: Splitting itself into a“good” bank and a “bad” one.
Lehman, which has been searching for a financial lifeline from outside investors, is contemplating placing about $30 billion of troublesome commercial mortgages and real estate that it owns into a new publicly traded company – the “bad” bank. The rest of Lehman – the “good” one – would then be able to carry on with the help of a cash infusion from one or more investors.
The move is one of several under consideration as Lehman prepares to report what could be grim third-quarter results this month. But the good bank/bad bank idea is hardly new. Several troubled financial institutions took similar steps in the late 1980s and early 1990s.
If Lehman goes through with the plan, the firm itself would probably inject $6 billion to $8 billion in equity into the new company, people briefed on the matter said Thursday. Lehman would also provide debt financing for the company and could raise additional money from outside investors, who would benefit from any recovery in the market for commercial and residential real estate assets.
A spokeswoman for Lehman declined to comment.
Boy, if I were a spokesperson for Lehman Brothers, I would be looking for another job – unless I knew they needed me and only me to inform the press corpse that outside of telling them I have no statement, I have no statement.
Still, not enough job security for me. They continue:
The fate of Lehman is one of the biggest questions hanging over Wall Street, where concern about the health of the financial industry and the broader economy sent the Dow Jones industrial average into a 345-point tailspin on Thursday.
Lehman, among the largest underwriters of mortgage-backed securities, has been brought to its knees by the running credit crisis. The firm’s hard-charging leader, Richard S. Fuld Jr., has been trying to sell some of the bank’s troubled commercial mortgage holdings, but has failed to find enough buyers.
Lehman’s next results are likely to underscore its precarious position. Analysts expect the firm to write-down as much as $5 billion of commercial real estate holdings and to post a loss of $2.49 a share.
Splitting off troubled assets would help Lehman attract new investors, many of whom have been reluctant to put money into the troubled financial industry.
Sure, the move will make Lehman more attractive to investors – wanted and unwanted alike. In more ideal credit markets, such a move would be applauded for the very reasons stated above, but given the current drought of liquidity, such a move will make Lehman more vulnerable to hostile takeover.
Neuberger Bermanis a sitting duck without the protection the tainted portfolios offer. The new company will never make it through this recess-stag-flation cycle we are in, and will be in for a few years. Nobody wants the crap, remember?
At least not until we are a little further in the game.
Lehman’s best bet is to use what everyone wants from them – Neuberger and some Hedge Funds – as leverage to entice those who do have money to invest, and take some of the pressure Lehman is feeling from their nearly radioactive real estate portfolios.
Splitting the assets like this is suicide, and it will not pay the bills.
(Last 12 mo.)
(Last 3 mo.)
(9-4-08)
(9-5-08 Bounce)
(9-8-08 Flop)
Orginally Posted 9-4-08 – I called the Lehman bounce…
Dead Cat Bounce?
When you take in combination the state of the Markets Today, the virtual Hot Pot of Rumors from Asia, and the Diminishing Confidence in the Finacials as a whole, and then take a look todays chart next to the three month and at the one year charts for Lehman Brothers and Merrill Lynch, you have got wonder if that is Lehman’s Dead Cat Bounce we are about to see… And Merrill is not far behind.
If that makes you wonder, as it has made me wonder – given that investors are treating Lehman like a Pariah now – what other factors are compounding problems and holding up a deal to save the crippled investment house? Here are a couple:
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 Dick Fuld, Jr, 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 spin-off of bad assets in 1988. `
`We’ll see it being used again during this crisis.”
Awesome – we all know how well that worked out for everybody the first time. Is this the Ultimate Set-Up or what? Get ready to get reamed.
Mounting chatter about a possible sale of Lehman Brothers to foreign investors is muddying the beleaguered investment bank’s closely watched sale of its asset-management unit, which is anchored by Neuberger Berman, sources tell The Post.
According to people familiar with the matter, Lehman has asked private-equity investors involved in the asset-management auction to submit the next, and perhaps final, round of bids for all or part of the business by Sept. 12.
However, the bidding process has been dogged by talk of Lehman possibly nailing a fat capital infusion from the Korean Development Bank or being acquired outright by parties that include the UK’s HSBC.
Some bidders believe that if Lehman either gets bought out or scores enough capital to emerge from its troubles, it might nix the sale.
As it stands now, Lehman CEO Dick Fuld is in the midst of an unprecedented juggling act that centers on shedding risky real-estate assets from its balance sheet while at the same time raising cash.
“We tend to think of these as mutually exclusive paths and we don’t believe that [Lehman’s] going down both paths,” said one source.
Lehman officials favor a deal in which the Koreans invest in the firm because they believe the franchise will remain intact.
However, if matters become worse for the bank, Fuld will be obligated to consider a Lehman sale.
On the asset-management front, bidders are believed to include private-equity firms Kohlberg Kravis Roberts, Hellman & Friedman and Bain Capital.
Sources said many of these firms were also asked to buy big stakes in Lehman or help the firm go private. However, they passed because the logistics of such a deal would be too complicated, one bank official said.
Private-equity buyers will be bidding on between 50 percent and 80 percent of Neuberger Berman, but could put in offers to buy all of it.
Neuberger is being valued by some private-equity shops at about $4 billion or $5 billion,including debt, or about 10 times Neuberger’s cash flow.
Lehman’s hedge fund business, the largest portion of which comprises its stake in D.E. Shaw, is being valued at between $1.5 billion and $2 billion. D.E. Shaw contributes $250 million to Lehman’s top line, while the rest of the hedge-fund operation contributes around $100 million, according to sources.
Reps for Lehman and the private-equity firms either declined to comment or did not return calls seeking comment.
Sounds to me like Dick Fuld has completely lost control of his company and all negotiations. If Fuld is simply holding out for more, he ultimately dooming the company to junk status, at which point it will either be ripped to pieces or swallowed whole.
Banks the world over have raised $400 billion in capital, Gross said, and may need to raise much more. The problem, though, as yesterday’s $1.5 billion preferred offering at Wells Fargo [WFC 29.67 -1.34 (-4.32%) ] showed, is that the institutional buyers are full, leaving only small investors to pick up the slack.
As Gross said, “There’s only so many billion and a half small investor bank capital deals that can be done from this point forward.”
One of my favorite philosophers – Marty Feldman – said it best…
“Well, at least it’s not raining.”
Your Mortgage or Your Life... 
