Lehman Bros moves to dispel fears by raising $4 billion capital

Source: Exec Digital USA

Date :4/2/2008 4:55:03 AM

The investment bank has raised $4 billion via an issue of preference shares to quash concerns over the state of its balance sheet following the collapse of Bear Stearns.

By making the shares available, Lehman has attempted to reassure investors that it has enough cash available to meet market demands and can avoid the liquidity problems that led Bear Stearns to near-bankruptcy.

The company’s shares rose $6.70, or 17.8 percent, to close at $44.34, as investors appeared unconcerned over worries of dilution. The bank said the offering, in convertible preferred stock, was oversubscribed.

Stability

Lehman's CFO Erin Callan said: "The success of the transaction is also reflective of the strength of the business model, the capital base and liquidity profile of the firm as we continue to successfully weather challenging environments."

However, analysts were mixed about the size and timing of Lehman's preferred stock offering.

"It seems evident that Lehman is being pushed hard by the markets to prove its balance sheet is safe," Punk, Ziegel & Co. analyst Richard Bove wrote in a research note.

"By raising additional capital and liquefying the balance sheet, the company hopes to put these fears to rest."

April 2, 2008