Howlingwolf
09-13-2008, 12:41 PM
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4744904.ece
Barclays Bank in talks over bargain basement deal for Lehman Brothers
Barclays Bank is in talks about a potential takeover of Lehman Brothers as the authorities in the United States seek a rescue of the stricken Wall Street investment bank, The Times has learnt.
While Henry Paulson, the US Treasury Secretary, masterminds the rescue talks this weekend, Wall Street endured one of its worst days in recent memory as fears of a wider crisis spread across the financial community.
Shares in AIG slumped 31 per cent as traders panicked about the future of the world’s largest insurer. The group said that it had hired JPMorgan Chase to help it to raise new capital and it is expected to reveal asset sales on Monday to bolster its balance sheet.
At the same time, Washington Mutual stock slipped 3.5 per cent to $2.73 as the bank’s new chief executive sought ways of steering the largest American savings and loan group through its crisis after it projected a new writedown and was downgraded to junk status by Moody’s, the credit rating agency.
Although John Varley, the chief executive of Barclays, and Bob Diamond, the chief executive of the investment banking division, have stated that they do not favour large-scale mergers, the prospect of securing Lehman businesses on favourable terms has piqued their interest. A number of other parties are also interested, including a consortium of Bank of America, JC Flowers, the private equity group, and China Investment Corporation, the sovereign wealth fund.
One possibility would be for JC Flowers to take on Lehman’s distressed real estate assets while the investment banking and asset management businesses could be sold to Bank of America or Barclays. Barclays believes that Lehman’s investment bank is an attractive asset and is understood to be interested should the price be sufficiently low.
Mr Paulson and Ben Bernanke, the Chairman of the US Federal Reserve, are racing to find a buyer and secure a sale of Lehman Brothers by tomorrow evening, so that the future of the Wall Street bank will be clear by the time that the Tokyo stock markets open on Monday. It is believed that Mr Paulson will narrow the field to one or two parties and will spend today and tomorrow pushing a serious suitor to complete the transaction.
It is also believed that Mr Paulson and Mr Bernanke are not willing to offer the kind of rescue funds to secure a sale as they did when Bear Stearns was sold to JPMorgan Chase in February. In that deal, Washington agreed to absorb as much as $29 billion in potential losses. Washington’s reluctance to bankroll a rescue deal of Lehman Brothers triggered another steep fall in the bank’s share price yesterday, which dropped 14 per cent to $3.65. The bank is valued at about $2.5 billion in New York, even though its fund management business is estimated to be worth about $10 billion alone. The bank controls assets of about $600 billion.
The future of Lehman Brothers, the most heavily exposed to toxic mortgage-backed bonds of all the Wall Street banks, has become increasingly precarious over the past week. Shares in the bank halved at the beginning of the week, prompting Richard Fuld, chairman and chief executive of Lehman Brothers, to bring forward details of the bank’s third-quarter results.
Barclays Bank in talks over bargain basement deal for Lehman Brothers
Barclays Bank is in talks about a potential takeover of Lehman Brothers as the authorities in the United States seek a rescue of the stricken Wall Street investment bank, The Times has learnt.
While Henry Paulson, the US Treasury Secretary, masterminds the rescue talks this weekend, Wall Street endured one of its worst days in recent memory as fears of a wider crisis spread across the financial community.
Shares in AIG slumped 31 per cent as traders panicked about the future of the world’s largest insurer. The group said that it had hired JPMorgan Chase to help it to raise new capital and it is expected to reveal asset sales on Monday to bolster its balance sheet.
At the same time, Washington Mutual stock slipped 3.5 per cent to $2.73 as the bank’s new chief executive sought ways of steering the largest American savings and loan group through its crisis after it projected a new writedown and was downgraded to junk status by Moody’s, the credit rating agency.
Although John Varley, the chief executive of Barclays, and Bob Diamond, the chief executive of the investment banking division, have stated that they do not favour large-scale mergers, the prospect of securing Lehman businesses on favourable terms has piqued their interest. A number of other parties are also interested, including a consortium of Bank of America, JC Flowers, the private equity group, and China Investment Corporation, the sovereign wealth fund.
One possibility would be for JC Flowers to take on Lehman’s distressed real estate assets while the investment banking and asset management businesses could be sold to Bank of America or Barclays. Barclays believes that Lehman’s investment bank is an attractive asset and is understood to be interested should the price be sufficiently low.
Mr Paulson and Ben Bernanke, the Chairman of the US Federal Reserve, are racing to find a buyer and secure a sale of Lehman Brothers by tomorrow evening, so that the future of the Wall Street bank will be clear by the time that the Tokyo stock markets open on Monday. It is believed that Mr Paulson will narrow the field to one or two parties and will spend today and tomorrow pushing a serious suitor to complete the transaction.
It is also believed that Mr Paulson and Mr Bernanke are not willing to offer the kind of rescue funds to secure a sale as they did when Bear Stearns was sold to JPMorgan Chase in February. In that deal, Washington agreed to absorb as much as $29 billion in potential losses. Washington’s reluctance to bankroll a rescue deal of Lehman Brothers triggered another steep fall in the bank’s share price yesterday, which dropped 14 per cent to $3.65. The bank is valued at about $2.5 billion in New York, even though its fund management business is estimated to be worth about $10 billion alone. The bank controls assets of about $600 billion.
The future of Lehman Brothers, the most heavily exposed to toxic mortgage-backed bonds of all the Wall Street banks, has become increasingly precarious over the past week. Shares in the bank halved at the beginning of the week, prompting Richard Fuld, chairman and chief executive of Lehman Brothers, to bring forward details of the bank’s third-quarter results.