Published September 13, 2008

Lehman scrambles to find buyer

Its shares dive further as execs talk to potential suitors and the Fed

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(New York)

LEHMAN Brothers' shares sank further yesterday as top executives raced to put a sale of the beleaguered investment bank in place.

Confidence has waned that Lehman Brothers Holdings will emerge from the financial crisis as an independent franchise, and the No 4 US investment bank is scouring Wall Street for a financial lifeline. Executives worked feverishly in the past 24 hours to find someone willing to buy all or part of the company, bankers and industry executives close to the situation said.

In morning trading, Lehman shares fell 40 cents, or 9.5 per cent, to US$3.82.

That only puts more pressure on Lehman chief executive Richard Fuld, who joined the company in 1961 as a college student and now serves as Wall Street's longest-serving CEO. He has tenaciously resisted putting the company up for sale, but finally relented after a free-fall in its stock price and growing doubts about its survival, according to bankers and industry executives.

Lehman chief executive Richard Fuld has tenaciously resisted putting the company up for sale, but finally relented after a free-fall in its stock price and growing doubts about its survival, according to bankers and industry executives.

Bank of America Corp, Japan's Nomura Securities, France's BNP Paribas, Deutsche Bank and Britain's Barclay's plc have been mentioned this week as potential buyers. Goldman Sachs Group, which also was being talked about as a potential buyer, is not interested, according to an industry official who ask not to be named.

Lehman is also in close contact with both the Treasury department and the Federal Reserve about how to proceed. Government officials, who asked for anonymity because of the sensitivity of the discussions, said that a number of options were being explored and that no decisions had been reached on how any deal involving Lehman would be structured. The Fed and the Treasury have been working to help resolve Lehman's situation. Fed officials are having conversations with relevant parties and getting updates. It's premature to say what form any final resolution would take.

Any resolution is not expected to involve the use of government money which would set it apart from the billions of dollars that the government put at risk to facilitate the sale of Bear Stearns in March and to rescue mortgage giants Fannie Mae and Freddie Mac this week.

Lehman's losses soared to almost US$7 billion in the last two quarters alone, primarily because of wrong-way bets on mortgage securities and other risky investments.

It's not alone. Global banks have lost more than US$300 billion since the sub-prime mortgage crisis spread to the credit markets one year ago. And the International Monetary Fund has suggested total losses globally could hit US$1 trillion.

Lehman Brothers hunted for months for a deep-pocketed investor to pump fresh capital into the firm, a move that would help restore confidence and replenish its broken balance sheet. Some analysts said Lehman was asking too high a price, others guessed that potential investors found too much risk on its books in the current environment. AP