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Friday 05th of December 2008
June 10, 2008

Lehman Brothers in $6bn rights issue


by Kay Murchie
”Lehman

Wall Street bank, Lehman Brothers, has announced it is to raise $6 billion (£3 billion) via a rights issue in a bid to shore up its balance sheet.

Lehman Brothers, which is the smallest of the major Wall Street investment banks, is predicting a loss in the second quarter of this year, which is expected to reach $2.8 billion due to the US sub-prime mortgage crisis.

It is likely that the second-quarter decline will push the bank into a $2.3 billion loss for the first half, down from a $2.4 billion profit last year.

Lehman Brothers has lost money on trading and hedging. The $2.8 billion loss, or $5.14 a share, for the 3 months to the end of May is the bank’s first loss since it was de-merged from American Express in 1994, and compares with a profit of $1.3 billion, or $2.21 a share, a year ago.

Full details of its quarterly figures will be reported on 16 June.

Chairman and chief executive of Lehman Brothers, Richard Fuld, said he was disappointed with the second-quarter results, which were worse than the market had expected.

However, with our strengthened balance sheet and the improvement in the financial markets since March, we’re well positioned to serve our clients and execute our strategy, added Mr Fuld.

The outlook for Lehman Brothers has been cut from stable to negative by Moody’s, the credit rating agency.

The announcement comes after Lehman Brothers confirmed plans to raise $6 billion by issuing $4 billion worth of new common stock and $2 billion worth of 3-year mandatory convertible preference shares.

Since February, Lehman Brothers has raised $8 billion.

The bank’s public offering of common stock and convertible preferred stock will be aimed at mainly US investors, analysts said.

Already this year, Lehman Brothers has seen its shares fall by over 50% on fears about its exposure to the mortgage market.

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