KEY POINTS:
Lehman Brothers chief executive Dick Fuld is in a race against time to rebuild the investment bank's battered balance sheet and set out a reason for the company to remain independent, amid growing calls for new leadership or a sale of the company.
Fuld will this week redouble
his efforts to find buyers for major assets, as Lehman prepares to close the books on another quarter of multibillion-dollar losses.
The company is hawking a stake in its profitable asset management business to private equity investors, and is in talks to sell some or all of its US$40 billion commercial property portfolio. Fuld has also considered selling an equity stake in the overall group to sovereign wealth funds, the pools of capital amassed by emerging market Governments.
All the talks, however, are bogged down in a dispute over value, with Lehman Brothers refusing to accept the knockdown prices on the table.
Shareholders hope that the stand-off will be broken before Lehman reports its third-quarter results in the middle of next month, when another hole is expected to open up in the company's balance sheet. With US$60 billion of mortgage-related investments still on its books, analysts believe a further US$3 billion to US$4 billion writedown is possible.
The group's overall loss for the quarter could be US$1.8 billion.
With its once-lucrative business in mortgage-related bond trading now a shadow of its former self, Lehman's core operations are unlikely to soon generate a sharp reversal of fortune.
Last week, it was reported that Lehman had pulled away from selling a 50 per cent stake in the company to the South Korean Government's Korean Development Bank after the failure to agree a price, but there is pressure on Fuld to return to the table.
Lehman shares jumped 15 per cent on Friday after the KDB said it was considering an outright takeover of a US investment bank, but it tried later to temper speculation it would make a hostile bid and Lehman shares ended up more modestly.
Dick Bove, the respected analyst at Ladenburg Thalmann, suggested that, if Fuld refused to sell assets or a stake at current prices, shareholders could themselves encourage a hostile bid.
- INDEPENDENT