Barclays Considers Bid for Lehman as Government Seeks Solution
By Ben Livesey and Yalman Onaran
Sept. 14 (Bloomberg) -- Barclays Plc, the U.K.'s third- biggest bank, moved closer to making a bid for Lehman Brothers Holdings Inc. as the U.S. government raced to find a solution for the faltering investment bank, two people familiar with the situation said.
Barclays's takeover approach depends on whether losses from Lehman's mortgage-related holdings can be sealed off, said the people, who declined to be identified because no formal offer has been made. Bank of America Corp., the biggest U.S. consumer bank, also is among the potential bidders for New York-based Lehman, which has lost 94 percent of its market value this year after record losses from investments tied to mortgages.
``The solution is to force the merger of Lehman now, this weekend, with a big commercial bank,'' said Richard Bove, a Lutz, Florida-based analyst at Ladenburg Thalmann & Co.
Lehman, led by Chief Executive Officer Richard Fuld, may be forced to liquidate unless buyers step up for all or part of the 158-year-old company, U.S. Treasury Secretary Henry Paulson and New York Federal Reserve Bank President Timothy Geithner told the heads of Wall Street's biggest firms at a meeting Sept. 12. Paulson has said he's reluctant to use government money to rescue Lehman. Talks with the banks continued yesterday without producing an agreement.
``Senior representatives of major financial institutions reconvened on Saturday with U.S. officials at the New York Fed. Discussions are expected to continue tomorrow,'' a New York Fed spokesman said.
Bad Bank
With backing from the company's board (Ho Jinx: *hee*hee*), Barclays President Robert Diamond, 57, is leading a team to review Lehman's books and gauge the level of guarantees the bank would need to cover potential losses, the people said. Peter Truell, a Barclays spokesman, declined to comment.
``Acquisitions are difficult for Barclays because of capital constraints,'' said Simon Willis, an analyst at NCB Stockbrokers Ltd. in London, who has a ``reduce'' rating on the London-based banks. Barclays raised 4.5 billion pounds ($8 billion) in a share sale in June to shore up capital depleted by credit losses and increase its securities trading and fund management units in the U.S.
Geithner, 47, and Paulson, 62, are pushing Wall Street to contribute money to a so-called bad bank that would assume Lehman's $50 billion of devalued real estate assets. That would make it easier for a buyer to take over the rest of the company while the assets are sold off.
The approach is similar to one Lehman presented to investors last week, which the company said would cost $5 billion to $7 billion.
Echoes of LTCM
Such an arrangement would be reminiscent of the rescue of hedge fund Long-Term Capital Management LP, which failed in 1998 as Russia defaulted on its debt, roiling global markets. Spurred by the New York Fed, Wall Street firms including Lehman contributed cash to prop up LTCM.
Lehman CEO Fuld, who participated in the LTCM talks and built Lehman into the biggest U.S. underwriter of mortgage securities during his four decades at the investment bank, was pushed toward a forced sale this past week after talks about a cash infusion from Korea Development Bank ended, eroding investor confidence and the company's market value.
Citigroup Inc.'s Vikram Pandit, JPMorgan Chase & Co.'s Jamie Dimon, Morgan Stanley's John Mack, Goldman Sachs Group Inc.'s Lloyd Blankfein, Merrill Lynch & Co.'s John Thain and Credit Suisse Group AG's Brady Dougan were among the CEOs at the meeting with government officials, according to the people, who asked not to be identified because the gathering was private.
By Ben Livesey and Yalman Onaran
Sept. 14 (Bloomberg) -- Barclays Plc, the U.K.'s third- biggest bank, moved closer to making a bid for Lehman Brothers Holdings Inc. as the U.S. government raced to find a solution for the faltering investment bank, two people familiar with the situation said.
Barclays's takeover approach depends on whether losses from Lehman's mortgage-related holdings can be sealed off, said the people, who declined to be identified because no formal offer has been made. Bank of America Corp., the biggest U.S. consumer bank, also is among the potential bidders for New York-based Lehman, which has lost 94 percent of its market value this year after record losses from investments tied to mortgages.
``The solution is to force the merger of Lehman now, this weekend, with a big commercial bank,'' said Richard Bove, a Lutz, Florida-based analyst at Ladenburg Thalmann & Co.
Lehman, led by Chief Executive Officer Richard Fuld, may be forced to liquidate unless buyers step up for all or part of the 158-year-old company, U.S. Treasury Secretary Henry Paulson and New York Federal Reserve Bank President Timothy Geithner told the heads of Wall Street's biggest firms at a meeting Sept. 12. Paulson has said he's reluctant to use government money to rescue Lehman. Talks with the banks continued yesterday without producing an agreement.
``Senior representatives of major financial institutions reconvened on Saturday with U.S. officials at the New York Fed. Discussions are expected to continue tomorrow,'' a New York Fed spokesman said.
Bad Bank
With backing from the company's board (Ho Jinx: *hee*hee*), Barclays President Robert Diamond, 57, is leading a team to review Lehman's books and gauge the level of guarantees the bank would need to cover potential losses, the people said. Peter Truell, a Barclays spokesman, declined to comment.
``Acquisitions are difficult for Barclays because of capital constraints,'' said Simon Willis, an analyst at NCB Stockbrokers Ltd. in London, who has a ``reduce'' rating on the London-based banks. Barclays raised 4.5 billion pounds ($8 billion) in a share sale in June to shore up capital depleted by credit losses and increase its securities trading and fund management units in the U.S.
Geithner, 47, and Paulson, 62, are pushing Wall Street to contribute money to a so-called bad bank that would assume Lehman's $50 billion of devalued real estate assets. That would make it easier for a buyer to take over the rest of the company while the assets are sold off.
The approach is similar to one Lehman presented to investors last week, which the company said would cost $5 billion to $7 billion.
Echoes of LTCM
Such an arrangement would be reminiscent of the rescue of hedge fund Long-Term Capital Management LP, which failed in 1998 as Russia defaulted on its debt, roiling global markets. Spurred by the New York Fed, Wall Street firms including Lehman contributed cash to prop up LTCM.
Lehman CEO Fuld, who participated in the LTCM talks and built Lehman into the biggest U.S. underwriter of mortgage securities during his four decades at the investment bank, was pushed toward a forced sale this past week after talks about a cash infusion from Korea Development Bank ended, eroding investor confidence and the company's market value.
Citigroup Inc.'s Vikram Pandit, JPMorgan Chase & Co.'s Jamie Dimon, Morgan Stanley's John Mack, Goldman Sachs Group Inc.'s Lloyd Blankfein, Merrill Lynch & Co.'s John Thain and Credit Suisse Group AG's Brady Dougan were among the CEOs at the meeting with government officials, according to the people, who asked not to be identified because the gathering was private.
