Lehman plans asset sales, posts US$3.93b loss

NEW YORK: Lehman Brothers Holdings Inc said it plans to sell a majority stake in its investment management division and spin off commercial real-estate assets as the struggling US investment bank fights to raise capital.

Wall Street's fourth-largest investment bank also reported a much-larger-than-expected third-quarter loss of US$3.93 billion (US$1 = RM3.46), hurt by US$5.6 billion of net writedowns.

"This is an extraordinary time for our industry and one of the toughest periods in the firm's history," chief executive Richard Fuld said in a statement.

Lehman shares erased early gains that pushed them above US$10. The shares, which fell 45 per cent on Tuesday, were down 49 cents at US$7.30 in pre-market trading as the company failed to announce a deal to sell its asset management business.

"What you are dealing with is a confidence issue," said Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, New Jersey, "There is still an underlying level of uncertainty as to what Lehman's future is."

Lehman said it has reduced exposure to toxic assets, including cutting its residential mortgage exposure by nearly half, and slashed its annual dividend to five cents per share from 68 cents.

Lehman said it intends to sell about 55 per cent of a portion of its investment management unit, including Neuberger Berman asset management and the private equity and wealth management businesses. It said it is in "advanced discussions with a number of potential partners" for such a sale.

The company also said it intends to spin off US$25 billion to US$30 billion of its commercial real-estate assets into a separate, publicly-traded company.

Lehman said its third-quarter net loss applicable to common shareholders was US$4.09 billion, or US$5.92 per share. Net revenue was negative US$2.9 billion, reflecting the write-downs.

Analysts' average forecast was a loss of US$3.43 per share on revenue of US$88 million, according to Reuters Estimates.

Selling the investment management division is designed to boost the company's capital levels; spinning off commercial real-estate assets is meant to reduce the toxic investments that have reduced Lehman's market value by more than US$40 billion since February 2007.

Before yesterday, Lehman had already taken US$7 billion in credit-related writedowns and losses since the start of the global credit crisis.

By Reuters