LEHMAN may be up for sale after $4 Billion Q3 Loss

LEHMAN Brothers, in a desperate bid to survive, announced plans Wednesday to sell a majority stake in its prized investment management business and said a sale of the entire company was possible.
Lehman, battling the nation’s worst financial crisis since the Depression, also said it would spin off a troubled real estate unit and slash its dividend. Those moves come as the nation’s fourth largest investment bank reported an almost $4 billion third-quarter loss, boosting its losses so far this year to about $6.5 billion. The nation’s fourth-largest investment bank said it will spin off $25 billion to $30 billion of its commercial real estate operations and slashed its dividend to 5 cents from 68 cents in a move to save $450 million a year. The moves are intended to prove to Wall Street that the embattled bank has enough liquidity to survive.
But Lehman also said it is open to “examining all strategic alternatives to maximise shareholder value” which on Wall Street suggests it would consider a bid for the entire company.
Lehman Brothers Holdings, whose shares have plunged more than 80% this year as investors lost confidence in the company, said it lost $3.9 billion during the third quarter. The company, like others on Wall Street, suffered from wrong-way bets on mortgage securities and other risky assets.
“This is an extraordinary time for our industry, and one of the toughest periods in the firm’s history,” chief executive Richard Fuld said in a statement. “The strategic initiatives we have announced on Wednesday reflect our determination to fundamentally reposition Lehman Brothers by dramatically reducing balance sheet risk, reinforcing our focus on our client-facing businesses and returning the firm to profitability.” Lehman shares rose 61 cents, or 7.8%, to $8.40 in morning trading.
Lehman’s quarterly loss includes gross writedowns of $5.3 billion on residential mortgages and $1.7 billion on commercial real estate positions. The results reflect a continued decline in Lehman’s portfolio — in the second quarter the company lost $2.8 billion for the period, and in the year-ago period it posted profit of $887 million.
Lehman said it has reduced its residential mortgage exposure by 31% to $17.2 billion, and expects its sale of $4 billion of its UK residential mortgage portfolio to BlackRock Financial Management to be completed within the next few weeks. Lehman Brothers also reduced its commercial real estate exposure by 18% in the third quarter to $32.6 billion from $39.8 billion.
The company did not name a buyer for a 55% stake in its investment management business, which includes the prized Neuberger Berman asset management unit. The bank said the spinoff of the commercial real estate portfolio into a separate publicly-traded company, Real Estate Investments Global, will be completed in the first quarter of 2009.