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You might want to keep an eye on this one over the next 24 hours. There are several reports that a prospective infusion of cash by the Korea Development Bank has collapsed, with influential banking analyst Richard Bove predicting that the government will broker either a private investment or outright takeover before the market opens on Wednesday. Shares of Lehman Brothers plunged 45 percent. From TheStreet.com:
Swaps on Lehman Brothers debt indicate a 35% chance the firm defaults, according to Tim Backshall, chief strategist at Credit Default Research, a provider of market data and analysis. The price of insuring against $10 million worth of Lehman debt rose from $322,000 to over $500,000 on Tuesday. "The market is pricing in pretty much Armageddon right now," Backshall says, noting that the price of default protection on Lehman is higher now than it was during the March weekend when the federal government brokered the sale of Bear Stearns to JPMorgan Chase.
Lehman said in a statement that it would report third-quarter results and discuss its outlook in a conference call early Wednesday. One less-than-cataclysmic possibility would be the sale of its investment management division, which it has been shopping around at a price tag of $6 billion. From the NYT:
People with knowledge of the auction say Lehman has asked for final bids to be submitted by this weekend. Two private equity groups — Kohlberg Kravis Roberts and Hellman & Friedman — are still interested in the division. Others like the Carlyle Group showed initial interest but were not willing to pay Lehman’s asking price, people close to the matter said. If Lehman does not receive the price it wants, it could hold onto the investment management unit, spin it off in an initial public offering or sell a piece of it.
Mark Lacter created the LA Biz Observed blog in 2006. He posted
until the day before his death on Nov. 13, 2013.