Ailing investment bank Lehman Brothers announced yesterday an estimated US$3.9 billion loss in its fiscal third quarter on further write-downs from the real estate meltdown as it took a series of restructuring actions.
The beleaguered Wall Street firm, seen as in desperate need for a cash injection to shore up its finances, offered no new plans on that front, but announced plans to restructure to slash its exposure to the real estate sector.
Lehman said it would generate additional capital through the sale of a majority stake of around 55 percent in its investment management division.
The firm also said it was “formally engaged with BlackRock Financial Management,” to sell an estimated US$4 billion of its British residential mortgage portfolio.
Another step announced was the spin-off of its commercial real estate portfolio worth some US$25 billion to US$30 billion.
The moves came after a meltdown of shares of the Wall Street investment bank as hopes faded for an injection of fresh capital.
Those hopes for a “white knight” were dashed yesterday as South Korea’s state-run Korea Development Bank announced that it had abandoned negotiations about buying a stake in Lehman Brothers.
Lehman shares tumbled 44.95 percent on Tuesday to end at 7.79 and have plunged 88 percent since February.
“This is an extraordinary time for our industry, and one of the toughest periods in the firm’s history,” chairman and chief executive Richard Fuld said.
“The strategic initiatives we have announced today reflect our determination to fundamentally reposition Lehman Brothers by dramatically reducing balance-sheet risk, reinforcing our focus on our client-facing businesses and returning the firm to profitability,” he said.
Lehman announced its losses and restructuring a week ahead of plans aiming to shore up confidence and avert the kind of meltdown of confidence that killed rival Bear Stearns earlier this year.
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