Lehman to file for bankruptcy
Lehman Brothers Holdings Inc., the 158-year-old financial services firm, has announced that it intends to file for Chapter 11 bankruptcy after the investment bank's attempts to find a buyer fell flat.
Lehman Brothers Holdings Inc., the 158-year-old financial services firm, has announced that it intends to file for Chapter 11 bankruptcy after the investment bank’s attempts to find a buyer fell flat.
Lehman said it intends to file the petition with the United States Bankruptcy Court for the Southern District of New York, in order to protect its assets and maximize value, according to a statement by the firm.
The company noted that none of its broker-dealer subsidiaries or other units will be included in the filing and all of the broker-dealers will continue to operate.
Additionally, customers of Lehman, including customers of its wholly owned Neuberger Berman Holdings LLC wealth management unit, may continue to trade or take other actions with respect to their accounts.
The company is also exploring the sale of its broker-dealer operations and is in “advanced discussions” with a number of potential purchasers to sell its investment management division, according to the firm.
In conjunction with the filing, the company intends to file a several motions that will allow it to continue to manage operations, make salary payments and continue to provide benefits to its employees.
Shares of the New York-based investment bank plummeted 63 cents, or 15%, to $3.59 per share in Friday trading and dropped 78% last week.
Since the beginning of 2008, the value of the company’s stock has fallen 94%.
Over the weekend, Barclays PLC of London and Bank of America Corp. of Charlotte, N.C. broke off negotiations to purchase Lehman, apparently because both companies did not receive government guarantees to protect them from losses in Lehman’s mortgage portfolio, according to Crain’s New York Business.
On Wednesday, Lehman released its preliminary third-quarter results, posting a loss of $3.9 billion, or $5.92 per share attributed to “weak sales and write-downs of commercial real estate assets and a slower real estate environment,” according to Lehman chairman and chief executive Richard Fuld Jr.
The company posted a mark-to-market write-down of $7.8 billion.
Lehman is the second major U.S. investment bank to collapse in the past six months.
In March, The Bear Stearns Cos. Inc. of New York, the fifth-largest U.S. investment bank at the time, was bought by JP Morgan Chase & Co. and received a bail-out package from the government.
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