Lehman Brothers Holdings Chief Executive Dick Fuld is running out of time not only to keep his job as CEO but have the Wall Street firm remain independent.
As reported, Lehman is considering selling its investment management business, including the firm's crown jewel, the Neuberger & Bermanassetmanagement unit, to drum up much-needed capital and offset possibly billions in further writedowns from risky debt that went sour.
Fuld and his new No. 2, Bart McDade, are looking at a transaction in which they would sell 70 percent of the investment management business, keep the remaining 30 percent, and have some ability to buy back the 70 percent at a later date.
The carrot for this type of deal: the buyer, most likely a private equity firm, would get a warrant for a 20-25 percent stake in Lehman itself.
Still, Lehman doesnt have a lot of leverage, so it may ultimately have to sell a huge chunk of Neuberger without any strings attached.
A Lehman Brothers spokeswoman had no comment.
But even if Fuld does sell Neuberger, the smart money on Wall Street is betting that it won't be long before he sells Lehman itself, or is out of a job completely.
People close to Fuld confirm that McDade is handling more of the operational duties than his predecessor, Joe Gregory, had managed. But they consider it "a division of labor" rather than a sign that Fuld is looking to hand over the reins to McDade.
Still, other senior executives inside Lehman say that by handling more of the responsibilities Fuld would handle, this is a sign McDade could at the very least be named CEO in the not-so-distant future, with Fuld remaining as chairman.
All of that is of course contingent on Lehman's survival.
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Meanwhile, several Wall Street analysts predicted Tuesday that Lehman's write-downs in the third quarter could hit $4 billion.
In the past, Fuld and his management team were able to thrive by building an investment bank through shrewd acquisitions like the purchase of Neuberger to compete with the likes of Goldman Sachs .
Now in order to make it through the next quarter of additional losses, writedowns and the need to raise capital, Lehman is selling the very assets that made it one of the premier investment banks.
Inside Lehman, people are saying that the firm is merely cashing in on a profitable trade: Lehman purchased Neuberger for $2.6 billion in 2003, and it's worth a lot more now.
But people on Wall Street say selling something as good as Neuberger & Berman, which is having a great year in stock picking, represents a watershed moment for Lehman, a firm that has survived other brushes with death over the past 15 years.
A similar asset sale contemplated by Merrill Lynch , which had looked to sell a chunk of its stake in money manager BlackRock was ultimately rejected by Merrill out of fears of downgrades by the big rating agencies.
Some analysts say Lehman's sale of Neuberger will likely not translate into downgrades because Neuberger's represents a smaller share of Lehman's revenues.