September 11, 2008 - 11:28PM
The Associated Press
NEW YORK - With Lehman Brothers' shares signaling another steep drop on Friday, top executives are racing to put a sale of the beleaguered investment bank in place before it loses further market value and confidence.
Confidence has waned that Lehman Brothers Holdings Inc. will emerge from the financial crisis as an independent franchise, and the No. 4 U.S. investment bank is scouring Wall Street for a financial lifeline. Executives worked feverishly in the past 24 hours to find someone willing to buy all or part of the company, bankers and industry executives close to the situation said.
And the scrutiny is expected to grow more intense Friday, with investors placing bets that Lehman's stock will again nosedive. Shares fell 41 cents, or 9.7 percent, to $3.81 in after-hours trading; the stock skidded 41.8 percent to $4.22 during the regular session in New York, and is down more than 94 percent for the year.
That only puts more pressure on Lehman Chief Executive Richard Fuld, who joined the company in 1961 as a college student and now serves as Wall Street's longest-serving CEO. He has tenaciously resisted putting the company up for sale, but finally relented after a free-fall in its stock price and growing doubts about its survival, according to bankers and industry executives. They asked not to be named because they are not authorized to comment publicly.
Bank of America Corp., Japan's Nomura Securities, France's BNP Paribas, Deutsche Bank AG and Britain's Barclay's Plc have been mentioned this week as potential buyers. Goldman Sachs Group Inc., which also was being talked about as a potential buyer, is not interested, according to an industry official who ask not to be named.
Lehman is also in close contact with both the Treasury Department and Federal Reserve about how to proceed.
Government officials, who asked for anonymity because of the sensitivity of the ongoing discussions, said that a number of options were being explored and that no decisions had been reached on how any deal involving Lehman would be structured.
The Fed and the Treasury Department have been working to help resolve Lehman's situation. Fed officials are having conversations with relevant parties and getting updates. It's premature to say what form any final resolution would take.
Any resolution of the Lehman troubles is not expected to involve the use of government money which would set it apart from the billions of dollars that the government put at risk to facilitate the sale of Bear Stearns in March and to rescue mortgage giants Fannie Mae and Freddie Mac this week.
Randy Whitestone, a spokesman for Lehman, declined to comment.
Lehman's losses soared to almost $7 billion in the last two quarters alone, primarily because of wrong-way bets on mortgage securities and other risky investments.
It's not alone. Global banks have lost more than $300 billion since the subprime mortgage crisis spread to the credit markets one year ago. And the International Monetary Fund has suggested total losses globally could hit $1 trillion.
Lehman Brothers hunted for months for a deep-pocketed investor to pump fresh capital into the firm, a move that would help restore confidence and replenish its broken balance sheet. Some analysts said Lehman was asking too high a price, others guessed that potential investors found too much risk on its books in the current environment.
Fuld tried to assuage nervous investors on Wednesday by announcing a plan to sell a 55 percent stake in its prized investment management business and spin off its commercial real estate holdings into a publicly traded company.
He cast a wide net for potential investors, bankers and executives said, including stepping up talks with private equity firms such as Kohlberg Kravis Roberts & Co. and Bain Capital.
But analysts increased their criticism of Fuld on Thursday for not naming a potential buyer of its investment management unit, which includes Neuberger Berman, and because they said Lehman would need to finance the real estate spinoff itself.
"We believe some type of capital raise or transaction must be consummated quickly to improve confidence in Lehman," said Standard & Poor's financials analyst Matthew Albrecht
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