Lehman Brothers Panhandles $4 Billion to Stay Afloat
Rumors of solvency trouble at Lehman have dogged the company for weeks,
and had pushed the company's shares down 43% between the beginning of February and the end of March.
Today, Lehman Brothers preferred stock offer was oversubscribed; Priced at $4 billion instead of $3 billion.
A deal that could boost (dilute) Lehman's outstanding share count by about 15%.
Lehman said late Monday the deal was not meant to shore up the bank's balance sheet against write-downs,
but was instead meant to show critics that the market still has confidence in the #4 U.S. investment bank.
Lehman's convertible preferred share sale is not completely positive -- in addition to the potential increase in outstanding shares,
it will result in another $290 million of annual dividend payments, thanks to its 7.25% dividend yield.
Lehman said the convertible preferred securities were priced with a dividend yield of 7.25%
and their principal can be used to buy common shares at $49.87, or a 32.49% premium to their closing price on Monday.
Meanwhile, Fitch Ratings affirmed Lehman's AA- credit ratings while cutting the outlook to negative from stable, citing earnings headwinds it will face this year.
Fitch wrote in a report: "While the firm's diversification and improvements in finances are positives for the rating,
Lehman will face future losses as it tries to reduce mortgage related assets."
and had pushed the company's shares down 43% between the beginning of February and the end of March.
Today, Lehman Brothers preferred stock offer was oversubscribed; Priced at $4 billion instead of $3 billion.
A deal that could boost (dilute) Lehman's outstanding share count by about 15%.
Lehman said late Monday the deal was not meant to shore up the bank's balance sheet against write-downs,
but was instead meant to show critics that the market still has confidence in the #4 U.S. investment bank.
Lehman's convertible preferred share sale is not completely positive -- in addition to the potential increase in outstanding shares,
it will result in another $290 million of annual dividend payments, thanks to its 7.25% dividend yield.
Lehman said the convertible preferred securities were priced with a dividend yield of 7.25%
and their principal can be used to buy common shares at $49.87, or a 32.49% premium to their closing price on Monday.
Meanwhile, Fitch Ratings affirmed Lehman's AA- credit ratings while cutting the outlook to negative from stable, citing earnings headwinds it will face this year.
Fitch wrote in a report: "While the firm's diversification and improvements in finances are positives for the rating,
Lehman will face future losses as it tries to reduce mortgage related assets."
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