Lehman Brothers sheds assets to stem real-estate problems
3-month trading in Lehman Brothers in New York
U.S.-based global investment bank Lehman Brothers said Wednesday it will sell a majority stake in its investment management business and spin off its commercial real estate operations to shareholders to mitigate $7 billion US in losses on commercial and residential real estate.
The annual dividend has been cut to five cents US a share from 68 cents.
"This is an extraordinary time for our industry, and one of the toughest periods in the firm's history," chair and CEO Richard S. Fuld Jr. said in a news release.
The market initially was enthusiastic about the moves, bidding Lehman stock up to around $9, but it later fell back as investors questioned whether the restructuring was enough to return the company to profitability.
By the close, Lehman was trading at $7.25, off 54 cents.
The company will shed $25 billion to $30 billion of its commercial real estate by putting it into a separate, publicly-traded company, Real Estate Investments Global, early in 2009. Shares in that company will be given to Lehman's stockholders.
"The concentration of positions in commercial real estate-related assets has become a significant concern for investors and creditors," the company said.
Shares in Lehman, the fourth-largest investment bank in the U.S., closed Tuesday at $7.79, down from a 52-week high of $67.73.
The company has also been hurt by the U.S. and British housing markets.
Suffers Q3 loss of $3.9BLehman said it will sell about $4 billion of its British residential mortgage portfolio, cutting its exposure dramatically.
The company said its preliminary third-quarter loss was about $3.9 billion US ($5.92 a diluted share), compared to a profit of $887 million US ($1.54 a diluted share) in the third quarter of fiscal 2007.
"The net loss was driven primarily by gross mark-to-market adjustments stemming from writedowns on commercial and residential mortgage and real estate assets," it said.
The writedowns drove the company into negative revenue for the quarter. Net revenue is expected to be negative $2.9 billion, compared to $4.3 billion for the third quarter of fiscal 2007.
Writedowns include $5.3 billion on residential mortgage-related positions and $1.7 billion on commercial real estate positions.
U.S. companies with major real-estate investments or loans have been hammered by falling house and commercial property prices.
The U.S. government took over two key mortgage companies, Fannie Mae and Freddie Mac, on Sunday, and investment bank Bear Sterns was taken over by JPMorgan in March, also a deal backed by the government.
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