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Lehman Brothers, the ailing Wall Street bank, plans to lay off as many as 1,500 employees, or nearly 6 percent of its work force, before it announces third-quarter results on Sept. 15, a person briefed on the plans said Thursday.
Lehman [LEH
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] has already laid off 6,000 people since June 2007, mostly in its mortgage origination and securitization businesses. It was not immediately clear what divisions would bear the brunt of the new cuts, but virtually every Wall Street business is struggling, and investment bankers and traders at Lehman are anticipating cuts.
A Lehman spokesman declined to comment.
The bank is scrambling to piece together a plan to shore up its finances before it announces its third-quarter results. Those results are expected to be grim, and investors expect the bank to take dramatic steps before it announces write-downs that analysts say could be as much as $4 billion and an estimated loss for the quarter of $3.30 a share.
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Bert van Dijk Lehman Brothers |
At the heart of Lehman’s woes is a balance sheet bulked up with assets that are steadily losing value, including about $61 billion in mortgages and asset-backed securities.
Executives are examining many options, including the sale of Lehman’s investment management division, which includes Neuberger Berman and is expected to fetch anywhere from $7 billion to $10 billion. Other options include the sale of about $40 billion of troubled commercial real estate, and the creation of a separate unit that would be owned by Lehman shareholders and house all of Lehman’s toxic assets, freeing the investment bank to try and move forward.
People briefed on Lehman’s plans say an ideal situation would be to separate the toxic assets into a separate unit and then recapitalize the investment bank with the proceeds of a sale of Neuberger and perhaps a capital infusion from abroad.
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But a handful of analysts have suggested that selling Neuberger would hurt Lehman’s earnings potential too much. The firm’s fixed income, investment banking and trading units are under serious pressure.
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Lehman’s stock has been rattled by persistent rumors about what the firm’s next move will be. Last week, the stock fell 13 percent and rose 16 percent on two separate days. The shares have lost 73 percent of their value this year.
Top Lehman executives have been knocking on doors all over the world seeking a capital infusion, courting sovereign wealth funds and international investors including the Korean Investment Corporation. Citic of China and the Korean Development Bank, a far smaller, state- owned entity.
But a white knight has not come forward and another bad quarter — Lehman lost $2.8 billion in the second quarter and was forced to raise $6 billion in equity — will be difficult to manage in the deteriorating environment.
The bank has taken steps to try and shore up its capital and reduce the risk of its balance sheet. In the second quarter it shed $147 billion in assets, $22 billion of which were illiquid assets.
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