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 [转帖] LEH, to short or not to short? |
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theoretical
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作者：theoretical 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
With bluster befitting masters of the universe, Lehman Brothers Holdings put up $3 billion of preferred stock late Monday, implying that current investors were anxious to help it reinforce its finances.
Lehman did not provide terms of the sale, which apparently was being priced during the evening, but TradeTheNews.com reported that pricing talk was for an interest rate of 7.0% to 7.5% and that the conversion premium would be 30% to 35% above the current stock price. That seems be generous enough to have elicited interest from investors.
A lot about the issue was not clear. The preferred will be noncumulative, meaning the firm can skip dividends without much penalty if it runs into trouble. Lehman said it would be the "sole book-running manager" of the offering, but did not say if there was a syndicate behind it or if it was going to place the shares by itself, though the wording of its press release indicated the latter.
The company said the proceeds from the offering will be used to boost its capital and increase its financial flexibility.
"We also felt," said Erin Callan, chief financial officer, "this was the right time as there was a window of opportunity in the market, as we have received signfiicant interest from several key institutional investors, who have been strong supporters of the firm over time."
Those investors must really love the firm, whose shares crested last spring at almost $86 per share but closed on Monday at $37.64, down 23 cents, or 0.6%. In after-hours trading, when investors had a chance to react to the news, Lehman Brothers Holdings (nyse: LEH - news - people ) shares fell 2.0% more, to $36.90, a 74-cent loss.
Ms. Callan's statement notwithstanding, it seems as if Lehman is dealing from a position of weakness emanating from the subprime mortgage crisis. Its business mix resembles that of Bear Stearns (nyse: BSC - news - people ), which collapsed earlier this month and was forced to sell itself to JPMorgan Chase (nyse: JPM - news - people ) at a significant discount to its market value. (See "Financials Fall Into Bear Pit").
In recent weeks Lehman said it has $200 billion of assets it could sell or borrow against, and that its ability to borrow directly from the Federal Reserve should dispel questions about its viability. Lehman Brothers took a $1.8 billion write-down during the first quarter because of deterioration in the credit markets. It had taken about $2.1 billion in write-downs in the previous two quarters combined, a relatively modest amount compared with some of its rivals.
Still, the surprise capital-raising exercise smacks of at least temporary concern. That Lehman is turning to the public indicates it could not find one or two big investors willing to assist it on terms that were acceptable. The firm will avoid adding debt to its balance sheet by selling preferred shares but if its share price recovers sufficiently from the recent doldrums to trigger conversion, existing holders of its common stock will see their stakes diluted. Meanwhile 7% or so is a lot to pay for capital in an environment where 30-year Treasury bonds yield 4.31%.
The issue announced Monday will be for 3 million shares of series P preferred stock with a liquidation preference of $1,000 per share. "Lehman Brothers also expects to grant the underwriter for the offering an option to purchase up to 450,000 additional shares," the company said. If that wasn't a typographical error and it really meant underwriter to be in the singular, then it granted itself that generous greenshoe option in case demand really was avid.
Reuters contributed to this article.
作者：theoretical 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 [转帖] LEH, to short or not to short? -- theoretical - (3720 Byte) 2008-4-01 周二, 08:51 (1281 reads)
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