In These New Times

A new paradigm for a post-imperial world

FED Freaks Over Lehman Credit Lines – Credit Suisse Denies Rumors

Posted by seumasach on August 22, 2008

Your Mortgage or Your Life

21st August, 2008


Lehman Brothers may find themselves edging closer to disaster in today’s trading with word of nervous Federal Regulators supposedly making secret phone calls to follow up on”rumors” that Credit Suisse had withdrawn one of Leman’s remaining lines of credit. 


According to reports that began to surface in the wee hours of the morning, Federal Officials made the call sometime this last month, and were reassured by Credit Suisse officials that all lines were still available, and they gave no indication that would change any time soon, for whatever that is worth.


And as if it were not bad enough that ‘mom’ had to call Lehman’s friends house and check up them, it turns out that Lehman might have also been stood up by their date late last week.  The fickle suitor is none other than the Korean Sovereign Wealth fund, who has been seen sniffing around one end of Lehman or another, trying to figure out which is the half that stinks.


Lehman will have to figure out some way to come out on top, and soon.  I am still confident we will hear an announcement from Lehman by this time next week regarding the securing of much needed capital, but my fear now is that if one reached it may only be in the short term interests of Lehman, and that their long term out look will be grim with diminished cash flows and a significant level of C and D paper still on their books.  Think twice if you are long on Lehman.


From the Financial Times:

“Lehman Brothers, the beleaguered US investment bank, held secret talks to sell up to 50 per cent of its shares to South Korean or Chinese parties in the first week of August but failed to reach agreement with either.

The South Koreans and Chinese walked away after concluding that Lehman was asking too high a price, said New York-based people familiar with the potential buyers. Lehman declined to comment.”


“The talks reflect the growing pressure on Dick Fuld, Lehman’s chief executive, to raise capital ahead of the mid-September earnings report, which, analysts said, could include more writedowns of $4bn (£2bn), bringing the total so far to $12bn. Lehman shares have fallen nearly 85 per cent since early 2007 and its market value is now about $9.5bn.


“In addition to selling a stake in itself, Lehman is considering selling all or part of its holdings, including its troubled $40bn commercial real estate portfolio and its asset management arm, which includes Neuberger Berman. Analysts said the asset management arm was the crown jewel that could be worth up to $10bn.”


“In the first week of August, Lehman held parallel talks with the government-owned Korea Development Bank and China’s Citic Securities at its headquarters in New York’s Times Square area.”


And why would the Koreans, or anybody else jump into this market right now?  I mean aside from Jim Cramer calling Bottom two weeks ago.  Everything in Lehman’s mortgage related portfolios is still over-valued, and so is everyone elses for that matter.  Why not wait a year and pick up similar assets for half the price? 


In fact, I would not be surprised to learn that the vulchers waiting on the wings have actually engaged some troubled lenders in negotiation only withdraw in hopes of creating further instability.  When the announcement hits the opening bell in the morning.


Lehman shares could be in a free fall that would completely level their bargaining position.  And the FED freak-out doesn’t help either.  Today will be a long, long day for Lehman.

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