Posted on June 8th, 2008 in Daily Stock Market / Economic News - The Real Story
Just two months after Lehman ran to ‘TEST OUT” the new Fed Facility and just 30-days after we learned that they had fired up the CDO machine once again to create ‘investment grade’ securities for which to borrow against, they are raising $6 billion to be announced early this week, FT reports.
This will likely be portrayed by Lehman as ‘satisfying investor expectations’. This is because the street already thinks that they need money badly. But, if they really don’t need money and everything is peachy at Lehman, then that expectation will be dashed. Perhaps, in raising $6 billion and further diluting shareholder equity, shareholders will be happy and rally the stock in a vote of openness, confidence and thanks!
Lehman is working on plans to announce early next week that it is raising $5bn-$6bn in fresh capital as the bank discloses a large second quarter loss, people briefed on the matter said.
The earnings announcement, which had been expected for the week of June 16, is likely to be brought forward to address persistent rumours in the marketplace about Lehman’s financial condition. Lehman declined to comment on the timing of its earnings announcement or any capital raising plans.
People briefed on the matter said they expected Lehman to announce earnings and the capital infusion at the same time, perhaps as early as Monday or Tuesday.
These people said the capital infusion may include one or more US institutional investors, such as big pension funds, and one or more foreign banks, possibly from South Korea or Singapore.
Names mentioned by market sources as possible investors in Lehman include DBS, the Singaporean bank, Korea Development Bank and Woori Financial Group of Korea. All have declined comment or could not be reached.
In the US, market sources have mentioned Calpers, the big California public employee pension fund, as well as the New Jersey Division of Investment.
CV Starr, the investment vehicle of Hank Greenberg, former chairman and chief executive officer of AIG, has also been mentioned. All have declined to comment.
The capital raising is expected to come as Lehman, led by chief executive Dick Fuld, discloses a second quarter loss, the first in its history as a public company, driven by markdowns on mortgage related assets and a decline of $600m to $700m on certain hedging positions.
Lehman has consistently maintained that it does not need to raise capital.