Lehman stumbles; Merrill is sold

Source: Exec Digital USA

Date :9/15/2008 2:31:46 AM

The American financial system was shaken to the core this weekend as Lehman Brothers announced plans to file for bankruptcy protection, while Merril Lynch & Co agreed to be sold to Bank America Corp.

Lehman Brothers filed for bankruptcy following the breakdown of rescue talks, which failed after the US government refused to provide a similar financial backstop to Lehman’s potential buyers. Without such support, Barclays plc and Bank of America, the two most interested buyers, walked away

As a result, the investment bank said it intends to file for protection under Chapter 11 of the US Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York.

The Lehman board authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value. In conjunction with the filing, Lehman intends to file a variety of first-day motions that will allow it to continue to manage operations in the ordinary course.

Those motions include requests to make wage and salary payments and continue other benefits to its employees.

Merrill sale

Separately, Bank of America yesterday struck an all-stock deal to buy Merrill Lynch for US$29 a share, or US$50 billion.

“Acquiring one of the premier wealth management, capital markets and advisory companies is a great opportunity for our shareholders,” Bank of America Chairman and Chief Executive Ken Lewis said in a statement.

“Together, our companies are more valuable because of the synergies in our businesses.”

Following the acquisition of Merrill Lynch, Bank of America would have the largest brokerage in the world with more than 20,000 advisers and 2.5 trillion dollars in client assets.