The already beleaguered investment bank appears to be fighting for its survival today, trying to spin off two of its major divisions within the company to raise capital in the face of a $3.9 billion loss. Unfortunately, it will be trying to spin off $32 billion of its commercial mortgage assets- which aren’t very popular at the moment.
Lehman’s announcement came a day after the bank’s shares plunged 45 percent to $7.79 a share following reports that its efforts to secure a strategic investment from Korea Development Bank had failed. Investors also feared that the federal government would not bail out Lehman as it has mortgage giants Fannie Mae and Freddie Mac and investment bank Bear Stearns.
The investment bank has been struggling amid growing losses on its commercial and residential real estate holdings. It has been shopping its prized investment management division, which includes Neuberger Berman. People with knowledge of the auction say Lehman has asked for final bids to be submitted by this weekend.
Lehman has been under heavy pressure since the collapse of Bear Stearns, as investors believe its heavy reliance on mortgage-related underwriting and trading could lead it to suffer the same fate that forced Bear into an emergency sale to JPMorgan Chase.
Let’s hope they make it- though the “big news” would be if they don’t.