[DEBATE] : Lehman to announce initiatives, Korea Development Bank talks uncertain
Riaz K Tayob
riaz.tayob at gmail.com
Tue Sep 9 22:47:24 BST 2008
Lehman to announce initiatives, KDB talks uncertain
SINGAPORE Sep 10 2008 09:02
Lehman Brothers is set to announce its "key strategic initiatives" on
Wednesday that could include plans to sell a package of British real
estate assets to BlackRock.
The Wall Street Journal reported on its website that Lehman is in talks
with BlackRock over the sale and is expected to announce a separate plan
to spin off some commercial real estate assets into a new company,
citing people familiar with the matter.
Lehman, a casualty of the US subprime mortgage crisis, has brought
forward the release of the initiatives and quarterly results by a week
to 11.30am GMT on Wednesday after its shares sank as much as 46% on
Tuesday on growing concern over its ability to raise capital.
Lehman had already taken $7-billion in credit-related write-downs and
losses since the start of the global credit crisis.
Facing what may be billions of dollars in additional write-downs, the
bank has examined options from selling a stake to a Korean bank to
spinning off its investment management unit.
But a South Korean government official said on Wednesday state-run Korea
Development Bank has ended talks with Lehman over a possible investment
in the US bank due to lack of progress.
"No more talks are under way on a deal between the two sides," the
official briefed on the matter told Reuters by telephone, asking not to
be identified before any public announcement is made.
Separately, South Korea's Yonhap news agency quoted a high-ranking KDB
official as saying that KDB was seeking a controlling stake in Lehman
for about $6-billion, but Cho Hyun-eek, a KDB spokesperson, said the
bank was surprised by the report and declined to make further comment.
The Journal also said a new company, made up of some commercial real
estate assets that are to be spun off, is being referred to internally
at Lehman as SpinCo. The remaining portion of the firm, shorn of much of
its distressed real-estate assets, is being called CleanCo.
The investment bank has also been looking out for investors to buy a
piece of its investment management unit, which includes the profitable
asset-manager Neuberger & Berman.
People familiar with the matter told the Journal that a sale of a piece
of the company's investment-management unit could fetch about
$5-billion. Analysts have said Neuberger could fetch $7-billion to
$8-billion in a sale.
Lehman spokesperson Anne Lui in Hong Kong declined to comment on the
The firm's woes raised the possibility of a Washington-sponsored rescue
just a few days after a US takeover of mortgage companies Fannie Mae and
Freddie Mac and months after the Bear Stearns meltdown, which resulted
in a fire sale brokered by the government. US officials declined to comment.
Shares of Lehman plunged as much as 46% on Tuesday, wiping out
$4,4-billion in market value. The stock closed at $7,79 on the New York
Stock Exchange, down $6,36.
Investors are worried that Lehman chief executive Richard Fuld may fail
to raise enough capital to keep the company operating as losses mount
from soured mortgages and other toxic assets.
In what looked like a concerted effort to boost investor confidence in
Lehman, a slew of Wall Street firms, including Goldman and Citigroup,
put out statements saying they were still trading with the firm late on
Tuesday afternoon. - Reuters
Source: Mail & Guardian Online
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