<TABLE cellSpacing=0 cellPadding=0 width="100%" border=0><TBODY><TR>Sep 13, 2008
INVESTMENT BANK BOWS TO MOUNTING PRESSURE
</TR><!-- headline one : start --><TR>Lehman puts itself up for sale
</TR><!-- headline one : end --><TR>It reaches out to potential buyers, including Bank of America and Barclays </TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
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</TD><TD vAlign=bottom>
Lehman Brothers employees gathering at its London office on Thursday. Lehman has nearly 25,000 employees worldwide, and any buyer would almost certainly cut thousands of jobs as it absorbed its operations. -- PHOTO: REUTERS
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<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->NEW YORK: A day after Lehman Brothers sought to assure Wall Street that it could survive on its own, the United States investment bank, urged on by federal officials, bowed to mounting pressure and put itself up for sale.
As confidence in Lehman continued to drain away on Thursday, the bank, one of the oldest names on Wall Street, reached out to several potential buyers. The leading contenders are Bank of America and Barclays, the big British bank, according to people briefed on the negotiations. Lehman hopes to strike a deal within days.
Other bidders could include private equity groups like Kohlberg Kravis Roberts & Co, which was already planning to bid for Lehman's investment management division. However, the Fed is thought to prefer that Lehman be bought by a publicly traded bank with a more stable capital base.
In any case, the suitors are seeking help from the US Federal Reserve to help make a takeover more palatable. They want the Fed to guarantee a part of Lehman's troubled assets, these people said, similar to the way it backstopped the emergency sale of another foundering bank, Bear Stearns, in March.
But while the Treasury Department and the Fed were working to broker an orderly sale of Lehman, it was unclear whether the Fed would stand behind any deal, particularly after the US government took control of the nation's two largest mortgage finance companies only days ago.
The test will come if Lehman's potential buyers baulk at a purchase without the Fed's backing. If that were to happen, federal officials would be left to evaluate what risks a sudden collapse of Lehman might pose to the broader financial system.
The Fed's rescue of Bear Stearns prompted warnings from current and former regulators, who said that the Fed was creating a so-called moral hazard by encouraging firms to take on excessive risk in anticipation of government aid in the event their bets fail.
The regulators reluctant to backstop another investment bank may point to the fact that speculation about Lehman's potential failure has not generated as much concern among investors as Bear Stearns' implosion.
While Lehman's share price fell US$3.03 on Thursday to US$4.22, leaving the stock down nearly 94 per cent this year, the shares of other financial companies, including the big thrift Washington Mutual, stabilised after days of losses.
Still, the rapid decline of Lehman underscores that investors remain unnerved, with rumours about an institution's problems quickly becoming a self-fulfilling prophecy, as other banks seek to distance themselves to limit their financial exposure.
Lehman has few options.
Its stock's relentless decline has convinced Mr Richard Fuld, Lehman's hard-charging chief executive, that the time has come to let go.
'He's shell-shocked but he knows he has to sell,' said one person who recently spoke to Mr Fuld.
Lehman, which employs nearly 25,000 people around the world, tried to convince investors on Wednesday that it could survive on its own by selling divisions and spinning off commercial real estate assets, but its stock continued to decline. Any buyer would almost certainly cut thousands of jobs as it absorbed Lehman's operations, which include a valuable money management division.
Mr Fuld, who built Lehman into the biggest US underwriter of mortgage securities during his four decades at the firm, was cornered into a potential forced sale after talks about a cash infusion from Korea Development Bank ended, sparking a 70 per cent drop in the firm's market value during the past three days.
The moment of truth came when credit rating agencies downgraded their assessments this week.
Moody's said that if Lehman did not find a strategic buyer in the 'near-term', the agency would downgrade it, making it difficult for some institutions to do business with the firm.
'That's when BlackBerrys started buzzing,' said one Wall Street banker. 'It was clear Lehman would have to be sold.' NEW YORK TIMES, BLOOMBERG
INVESTMENT BANK BOWS TO MOUNTING PRESSURE
</TR><!-- headline one : start --><TR>Lehman puts itself up for sale
</TR><!-- headline one : end --><TR>It reaches out to potential buyers, including Bank of America and Barclays </TR><!-- show image if available --><TR vAlign=bottom><TD width=330>
</TD><TD width=10>
Lehman Brothers employees gathering at its London office on Thursday. Lehman has nearly 25,000 employees worldwide, and any buyer would almost certainly cut thousands of jobs as it absorbed its operations. -- PHOTO: REUTERS
</TD></TR></TBODY></TABLE>
<!-- START OF : div id="storytext"--><!-- more than 4 paragraphs -->NEW YORK: A day after Lehman Brothers sought to assure Wall Street that it could survive on its own, the United States investment bank, urged on by federal officials, bowed to mounting pressure and put itself up for sale.
As confidence in Lehman continued to drain away on Thursday, the bank, one of the oldest names on Wall Street, reached out to several potential buyers. The leading contenders are Bank of America and Barclays, the big British bank, according to people briefed on the negotiations. Lehman hopes to strike a deal within days.
Other bidders could include private equity groups like Kohlberg Kravis Roberts & Co, which was already planning to bid for Lehman's investment management division. However, the Fed is thought to prefer that Lehman be bought by a publicly traded bank with a more stable capital base.
In any case, the suitors are seeking help from the US Federal Reserve to help make a takeover more palatable. They want the Fed to guarantee a part of Lehman's troubled assets, these people said, similar to the way it backstopped the emergency sale of another foundering bank, Bear Stearns, in March.
But while the Treasury Department and the Fed were working to broker an orderly sale of Lehman, it was unclear whether the Fed would stand behind any deal, particularly after the US government took control of the nation's two largest mortgage finance companies only days ago.
The test will come if Lehman's potential buyers baulk at a purchase without the Fed's backing. If that were to happen, federal officials would be left to evaluate what risks a sudden collapse of Lehman might pose to the broader financial system.
The Fed's rescue of Bear Stearns prompted warnings from current and former regulators, who said that the Fed was creating a so-called moral hazard by encouraging firms to take on excessive risk in anticipation of government aid in the event their bets fail.
The regulators reluctant to backstop another investment bank may point to the fact that speculation about Lehman's potential failure has not generated as much concern among investors as Bear Stearns' implosion.
While Lehman's share price fell US$3.03 on Thursday to US$4.22, leaving the stock down nearly 94 per cent this year, the shares of other financial companies, including the big thrift Washington Mutual, stabilised after days of losses.
Still, the rapid decline of Lehman underscores that investors remain unnerved, with rumours about an institution's problems quickly becoming a self-fulfilling prophecy, as other banks seek to distance themselves to limit their financial exposure.
Lehman has few options.
Its stock's relentless decline has convinced Mr Richard Fuld, Lehman's hard-charging chief executive, that the time has come to let go.
'He's shell-shocked but he knows he has to sell,' said one person who recently spoke to Mr Fuld.
Lehman, which employs nearly 25,000 people around the world, tried to convince investors on Wednesday that it could survive on its own by selling divisions and spinning off commercial real estate assets, but its stock continued to decline. Any buyer would almost certainly cut thousands of jobs as it absorbed Lehman's operations, which include a valuable money management division.
Mr Fuld, who built Lehman into the biggest US underwriter of mortgage securities during his four decades at the firm, was cornered into a potential forced sale after talks about a cash infusion from Korea Development Bank ended, sparking a 70 per cent drop in the firm's market value during the past three days.
The moment of truth came when credit rating agencies downgraded their assessments this week.
Moody's said that if Lehman did not find a strategic buyer in the 'near-term', the agency would downgrade it, making it difficult for some institutions to do business with the firm.
'That's when BlackBerrys started buzzing,' said one Wall Street banker. 'It was clear Lehman would have to be sold.' NEW YORK TIMES, BLOOMBERG
