WORLD> America
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WORLD> America
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Lehman in sale talks as survival questioned - sources
(Agencies)
Updated: 2008-09-12 10:21 "We thought getting news out of Lehman was going to clear the dark cloud, but it really doesn't. It just leaves us with a company that's limping along, that may or may not make it," said Arthur Hogan, chief market analyst at Jefferies & Co.
The company has written down billions of dollars in assets in the last year -- largely holdings of complex mortgage-backed securities. And over the last several months, it has been battling rumors of defecting clients and talk of a discounted takeover.
"Unfortunately for Fuld, who has been very adamant about keeping Lehman independent, he has to find a partner now, someone to acquire them." Lehman's survival may hinge on the sale of a 55 percent stake in Neuberger Berman, its asset management business. But not everyone is confident a deal will be consummated. "We are not even sure that the auction process for 55 percent of their asset management group is going to work because the people that win the auction need to find the money to buy it," Hogan said. While Lehman's 25,000-plus employees, who own about one-third of the company's shares, anxiously waited for word on their future, other businesses near its new midtown Manhattan headquarters were also concerned. Lehman used to hold up to three corporate events a week at nearby Tonic Restaurant and Bar until they cut back earlier this year, said Joseph Jacobino, director of marketing and sales at Tonic. "They scaled back dramatically -- to none," he said. "It was a significant loss for us." For some, though, the problems have been a boon. Alison Ryan, a bartender at Tonic, said the last few days have been busy, as laid-off Lehman workers toasted each other. Whither Fuld? Lehman's growing problems have led to questions about CEO Fuld, 62, and his strategy to get the firm on more solid footing. "What you have is a loss of confidence in management, and they've got to start doing things instead of saying they're going to do things." said William Smith, president of Smith Asset Management in New York. "I'm in shock as to how Fuld let this get away from him. From what I understand, the guy was a great executive." Fuld won a reputation as a survivor and top-notch leader since coming to Lehman as a trader in 1969. He endured in-fighting that led to the company's sale to Shearson/American Express in 1984 and was running Lehman when it was spun off -- undervalued and unwanted -- in 1994. Fuld was considered one of Wall Street's ablest CEOs and was also one of Wall Street's best paid. In most years, he took home bonuses on par with those paid at much-larger rival Goldman. Last year, he received $22 million in compensation. "Historically, Fuld has been someone you don't bet against when times get tough. This time, things may be too tough," said Holland. "The stock price is saying that." Other Views The Lehman worries were not just affecting the stock. Its credit protection costs soared to a record, and some of its bonds traded near distressed levels. Lehman's bond prices tumbled, sending some yields well above levels widely considered as distressed. Its 4.25 percent notes due in 2010 were yielding 18.8 percentage points more than Treasuries -- almost twice the level that traders consider distressed -- according to data from MarketAxess. Five-year credit default swaps traded at 650 basis points on Thursday, or $650,000 a year to protect $10 million of debt, widening 70 basis points from Wednesday's close, according to CMA DataVision. |
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