Bankruptcy

Lehman Brothers May Need to Raise Capital As Analysts See Loss

By J. Michael McBride

According to analysts, Lehman Brothers may need to seek more capital to alleviate concerns as the company prepares to report its first-quarterly loss since going public in 1994.

Analysts at Oppenheimer & Co. and Bank of America predict that Lehman Brothers, the fourth largest U.S. securities firm, will probably post a loss of 50 to 75 cents a share in the second-quarter. “New York-based Lehman holds very large, illiquid assets and we can't rule out equity issuance to replenish the balance sheet,” said Merrill Lynch & Co. One report stated that Lehman is seeking an equity infusion from a foreign government as so many other financial firms have done.

“Lehman may seek as much as $4 billion by selling common stock,” the Wall Street Journal reported. According to Bloomberg “the company has raised $8 billion since February amid asset writedowns and losses from the collapse of the U.S. subprime mortgage market.”

“S&P downgraded the credit ratings of Lehman and bigger New York-based competitors Morgan Stanley and Merrill yesterday, saying they may disclose more writedowns for devalued assets. Lehman's credit rating was cut to A from A+, as was Merrill's.” Some argue that the credit rating agencies are not being honest on their appraisal of companies because to do so would trigger an economic meltdown.
The value of Lehman’s stock dropped 48 percent in New York trading this year.

Here is a link to this article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aTuOsweHP_pE&refer=home

Yameena

Full post as published by Texas Lawyer Blog on June 04, 2008 (boomark / email).