Lehman

[Asher]

Bank of America is now a potential suitor?

LONDON, Sept 12 (Reuters) - Expectations that a deal will emerge to save Lehman Brothers (LEH.N: Quote, Profile, Research, Stock Buzz) mounted on Friday after its plunging share price prompted intensive talks with U.S. officials about rescue options.

Lehman's shares added 4 percent to $4.40 in pre-market trading in New York as talk swirled that the bank would put out a statement before Wall Street opens. Lehman declined to comment.

The bank wrote down $5.6 billion for the third quarter, dragging it to a record quarterly loss of $3.9 billion and has failed to attract investors to shore up its capital position.

Bank of America Corp (BAC.N: Quote, Profile, Research, Stock Buzz) (BofA) is seen as the most likely suitor for the 158-year-old firm, according to various reports and analysts. BofA declined to comment.

"I believe that Bank of America will win the auction for Lehman Brothers. There is a natural fit between the two companies," Ladenburg Thalmann analyst Richard Bove said in a note.

Lehman and U.S. officials were in discussions about a number of options, including a complete sale, sources with direct knowledge of the talks said late on Thursday. One of the sources said the firm was resisting government intervention.

The Treasury and Federal Reserve were engaged in the talks, which could be completed this weekend, a second source said. The U.S. government is hoping to avoid spending money on a bailout, another person familiar with the situation told Reuters.

European banks Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) and HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) have also been linked with Lehman, but executives at both have distanced themselves from such a move in past weeks and they are seen as unlikely to make a move.

Also reflecting concerns that integrating Lehman would be a disruptive deal for any bank, Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz), another potential rescuer, is not pursuing a takeover, sources said on Thursday.

By buying Lehman, BofA would get access to one of the best fixed income trading desks, Bove said. "It immediately becomes a first rank player in the equity investment banking sector...it gains access to customers around the world in the capital markets arena," he said.

Lehman's shares fell 42 percent to $4.22 on Thursday, cutting its market value to under $3 billion. The stock rose 20 percent in Frankfurt (LHMH.F: Quote, Profile, Research, Stock Buzz) but pared gains after a statement failed to emerge.

Optimism a deal could be struck also lifted the broader European bank index and Asian bank shares, dealers said. The DJ Stoxx European bank index was up 1.7 percent.

Lehman Chief Executive Dick Fuld, long resistant to ceding independence, has been trying to sell just a part rather than all the company, sources familiar with the situation said.

But investors have given a thumbs-down to revival plans unveiled on Wednesday, saying they lacked real progress. It prompted fears clients and trading partners might take their business to more stable firms.

Its troubles have shown how confidence remains key for investment banks.

"The ups and downs that followed the Bear Stearns bailout should be still fresh in the mind of investors and the economic backdrop has deteriorated since," Deutsche Bank analysts said in a report on Friday.

They said a takeover of Lehman could spark a relief rally, but warned of a worsening global economic picture.

Bear Stearns was taken over by JPMorgan (JPM.N: Quote, Profile, Research, Stock Buzz) in a government-backed bailout in March.

Lehman, founded in 1850 by three German immigrants who traded cotton, has found itself in the eye of the credit crunch after writing down the value of billions of dollars in assets in the last year, largely on complex mortgage-backed securities.

It has failed to attract outside investors to shore up its capital position, however, unlike rivals such as Citigroup (C.N: Quote, Profile, Research, Stock Buzz), Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) and UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz).

This week's selloff gathered pace after talks broke down to sell a stake to state-run Korea Development Bank. The head of KDB said on Friday that talks remained on hold.

Lehman's survival may hinge on the sale of a 55 percent stake in Neuberger Berman, its asset management business, and prospects on that deal could also come to a head on Friday.

Buyout firms in the running to bid for the investment management assets are Kohlberg Kravis Roberts [KKR.UL], Hellman & Friedman, Bain Capital and Clayton, Dubilier & Rice, sources said, adding Lehman had set a Friday deadline for offers. (Writing by Steve Slater, Lincoln Feast and Ian Geoghegan; Editing by Louise Ireland)

[Asher]

http://www.nytimes.com/2008/09/12/business/12employees.html?hp

For Lehman Employees, the Collapse Is Personal

In the last few days, employees of Lehman Brothers have wrung their hands as the value of their stock evaporated before their eyes. Now, many fear losing their jobs, too.

In scenes eerily reminiscent of the final days of Bear Stearns, the megawatt energy within Lehman Brothers has dimmed to a hum as employees focus on the fate of the firm and what it might mean to them. To make matters worse, pink slips for previously announced layoffs were being handed out this week.

“Everyone is walking around like they have just been Tasered,” said one Lehman employee, who, like many interviewed for this article, declined to be named because he was not authorized to talk publicly. “Everyone was always hoping we would pull through. Now, that is not really an option.”

On Lehman’s third- and fourth-floor trading floors overlooking Broadway’s lights in Midtown Manhattan, traders continued working at their terminals, or at least were giving the appearance of doing so. At the same time, many polished their résumés and contacted recruiters.

If Lehman is sold — as now appears likely — the buyer will fire many of them. And they know that tens of thousands of other Wall Streeters laid off in the tsunami sweeping the financial industry — including many recently let go from Bear Stearns — are already chasing after too few jobs.

Wall Street is used to ups and downs, but this latest round of cuts brought about by the credit crisis is turning out to be one of the worst in recent memory — a fate compounded by a shrinking economy. As of June, many of the more than 83,000 employees dismissed from banks and brokerage firms worldwide have come from firms based in the New York area.

Everyone at Lehman knows what happened at Bear Stearns: Star employees did not have a hard time finding work when Bear was sold in a fire sale this year, but JPMorgan initially kept only about 6,500 of 13,500 employees. Many are still looking for work.

As at Bear, many at Lehman have taken a hit from a plummeting stock price. From an all-time high of $86.18 a share in early 2007, the stock has plunged, closing at $4.22 Thursday.

In an arrangement that is typical of Wall Street, Lehman employees have gotten much of their pay in stock and stock options in recent years. That figure could range from 10 percent to 60 percent in Lehman stock, according to a person close to the company.

“Over the past decade an increasing amount of the compensation had been given in stock and stock options,” said Robert Willens, a tax expert who worked at Lehman from 1987 to this year. “Employees were paid in restricted stock that took several years to vest. Stock was granted at the current price.”

As recently as last week, Lehman’s stock was selling for $16 a share, and many Lehman employees were still betting that their chairman and chief executive, Richard S. Fuld Jr., would figure out a way to salvage the bank, and their future — a hope he reinforced Wednesday with assurances to Wall Street that the firm could remain standing alone.

On Thursday, those hopes ran dry as the share price plunged so low and so fast that potential suitors came out of the woodwork to see if they could snap up the 158-year-old institution for a bargain-basement price.

As employees left the firm’s Seventh Avenue headquarters Thursday, a Lehman trader said people were trying to keep a stoic face. “They are not showing anything,” he said.

As widely respected and liked as Mr. Fuld has been at the firm, now that the cold prospect of losing a life savings in Lehman stock has become more of a reality, many employees have grown resentful.

“We feel like we have been controlled by events and haven’t controlled them,” said one rank-and-file employee. “And it has just been the most punitive market. Is there frustration with the management team? Of course.” Another employee who left Lehman earlier this year lamented that he had put enough faith in the firm to retain shares — a decision he is paying for. “My children’s education fund is wiped out,” said this person.

“I’m not a millionaire like a lot of these guys. Of course this is on Dick’s hands,” he said, referring to Mr. Fuld. “It all happened on his watch.”

The investment bank said that Mr. Fuld was not available for comment.

A number of Lehman employees said the widespread support at the firm for Mr. Fuld was not as strong as it had been, largely because his strategy to save Lehman, including the partial sale of Neuberger Berman, its money management unit, would not be enough. These people said they had expected and hoped that Mr. Fuld would step aside Wednesday and let Herbert H. McDade III, the firm’s president, ascend and start anew.

Mr. Fuld himself has seen much of his wealth disappear. At the stock’s peak, his 11.4 million shares of various types of stock and 2.5 million stock options were worth about $956 million, according to James F. Reda Associates, a consulting firm. Now, they are worth only about $40 million. But employees know that Mr. Fuld has reaped rich rewards in his decade and a half at the helm.

Even if he loses his grip at Lehman, he stands to collect more. He does not have a severance agreement if he loses his job, but if he were terminated without cause, Mr. Fuld could expect to collect a $16 million pension and $5.6 million in deferred compensation.

Lots of good people there.

[Riesstiu IV]

Lehman is teh man!

[Colon™]

They iz gonna make it to teh weekend!

[Asher]

A colleague of mine is scheduled to fly down monday to be on-site all next week at the HQ in NY. It's all up in the air now, I guess.

[OneFootInTheGrave]

Originally posted by Colon™
They iz gonna make it to teh weekend!

[Victor Galis]

Well, I interned there in summer 2007. I'm kind of glad working there now didn't become part of my long-term plan.

[Asher]

Originally posted by Victor Galis
Well, I interned there in summer 2007. I'm kind of glad working there now didn't become part of my long-term plan.

Ooo.

I was there summer 2007. Were you in the seventh ave location?

[DanS]

Kaboom!

Let's flush LEH down the toilet, shall we? $50 billion to $2.5 billion in less than a year. Sounds like they're right geniuses.

[Victor Galis]

Originally posted by Asher

Ooo.

I was there summer 2007. Were you in the seventh ave location?

I was in the 1301 6th Ave. one, so mercifully I didn't have to wear a suit jacket at all times.

[Aeson]

Victor and Asher... Next time the two of you both work in the same place at the same time... tell us before you bankrupt them. (So we can buy the Puts!)

[Asher]

What group did you work with?

[Asher]

Originally posted by Aeson
Victor and Asher... Next time the two of you both work in the same place at the same time... tell us before you bankrupt them. (So we can buy the Puts!)

I'm actually probably cursed. Just on Wednesday I wrapped up a major project with Washington Mutual designing the software for their major renovation of the 2,600 retail stores. It's really ****ing cool software, top-end WPF stuff, that customers and employees alike would love. It's a shame that it's probably not ever going to get deployed.

But most importantly, our company got our big payment for the project on Wednesday...perfect timing.

Which bank should I wreck next?

[DanS]

Merrill

Edit: No. Merrill's already wrecked. They have no use for your services.

[Aeson]

Originally posted by Asher
But most importantly, our company got our big payment for the project on Wednesday...perfect timing.

Glad to hear it

Next should be... um... lets see... who isn't bankrupt already yet... um...