| Mikiko |
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| Joined: 31 Mar 2008 |
| Posts: 11 |
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Lehman Brothers Holdings Inc, an investment bank beset by rumors of not having enough funding, said it plans to raise $3 bln of capital to quash questions about its stability.
Lehman's shares fell 2.8% to $36.60 in after-market trading after the planned convertible preferred share offer was announced, since it could result in more shares being issued.
Chief Financial Officer Erin Callan told Reuters the deal was meant to end questions about the bank's balance sheet, and the capital was not needed to offset the impacts of write-downs or losses.
"We have not changed our view on our real need for capital, but we have changed our view from a perception perspective," Callan told Reuters.
Questions about whether Bear Stearns Cos Inc had enough capital were enough to force what was once the fifth-largest U.S. investment bank to sell itself for a pittance. Lehman Brothers is the fourth-largest U.S. investment bank, and fears about its stability have helped push down its share price more than 40% since February.
The rationale for the deal struck some investors as odd.
"This just makes me scratch my head. Why do this if you don't have to?" said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati, which does not own Lehman shares.
The global financial sector is increasingly starved of capital after sustaining more than $200 bln of losses from subprime mortgages and other assets.
But Lehman says it has more than enough access to funds, and several large institutional investors have agreed to buy at least $2.5 bln of the convertible preferred offering. Smaller funds looking at buying into the deal said demand is strong. Lehman said it can sell up to another $450 mln of additional convertible preferreds to meet extra demand.
A person familiar with the matter said investors had placed orders for more than $10 bln of securities in the sale, and that Lehman may ultimately sell $4 bln of securities.
Mike Holland, who oversees more than $4 bln at Holland & Co, is not trying to buy the convertibles, but says if the sale goes well, it could put fears about Lehman to rest.
"If investors thought there were real problems at Lehman, you couldn't find buyers for $3 bln of securities at any price," he said.
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