Wednesday, September 10, 2008

Lehman Reports a $3.9 billion loss

Lehman reports a bigger loss.  Plans real estate spinoff.

Lehman reported a $3.9 billion third-quarter loss on $5.6 billion of writedowns.  It will also spinoff it's real estate which is expected to be completed in Q1 2009.

This is one of the things we have been warning about.  Remember that Lehman had a chance to raise capital earlier.  But instead of raising capital, we heard Fuld saying we don't need it.  Now that they need it, the capital has dried up. 

Lehman gained almost 15 percent to $8.95 at 8:57 a.m. in New York trading, while the cost to protect against a default by Lehman rose to a record. Credit-default swaps on Lehman jumped 115 basis points to 590 basis points as of 8:08 a.m., according to broker Phoenix Partners Group. That surpassed a previous peak of 580 basis points in March after the collapse and emergency sale of Bear Stearns Cos. to JPMorgan Chase & Co.

Once again, there is a divergence between credit and equity.  Lehman stock has been very volatile this morning.

``The opportunity has been there, but the lack of willingness to deal on Fuld's part has been huge,'' Bove said.

Didn't Bove recently say that Lehman is a buy and there will be someone to buy it out?  Bove seems to be flip-flopping on Financials faster than a politician.

Standard & Poor's said yesterday it may lower its A1 long- term rating on Lehman because the ``precipitous decline'' in the share price creates uncertainty about the firm's ability to raise additional capital. S&P said Lehman's liquidity is ``sound,'' noting the firm has the ability to borrow from the Federal Reserve.

Like this agencies have the guts to downgrade anything.  Remember they did not downgrade the insurers.  They will not downgrade anything until after it's too late.  If they were honest, we may never be in this mess in first place.


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