Lehman: No Substantial Illiquid Asset Writedowns
Lehman Brothers co-Chief Administrative Officer Ian Lowitt said Wednesday the company doesn't expect substantial write-downs of its most illiquid assets.
Lowitt, speaking at an investor conference, said Lehman remains "very comfortable" with its valuation of so-called level 3 assets on its books. Level 3 assets trade infrequently and are valued based on a bank's own estimates.
Lowitt added that the asset-backed securities business, which is currently in a deep freeze, will come back eventually.
Lowitt also said Lehman has bet that repackaged mortgage debt will fall further.
Lehman's trading moves in repackaged debt securities, known as collateralized debt obligations (CDOs), was prescient. Earlier Wednesday, Bear StearnsChief Financial Officer Sam Molinaro said his bank will record $1.2 billion of write-downs in the fourth quarter, driven mainly by the plunging value of CDOs in recent months.
Investors relieved at Lehman's position in CDOs backed by asset-backed securities boosted the bank's shares more than 3 percent.
Lowitt, speaking at an investor conference, also said the bank's entire subprime mortgage position has been hedged.