Details of Lehman's Plan
Lehman Brothers, the fourth-largest U.S. investment bank, announced on Wednesday plans to sell a majority stake in its investment management division and spin off real estate assets, as it posted a preliminary quarterly net loss of $3.9 billion.
These are the details of Lehman's plan:
INVESTMENT MANAGEMENT UNIT
- The bank plans to sell a 55 percent stake in a subset of its investment management division (IMD).
- The subset includes the asset management, private equity and wealth management businesses.
- The subset excludes Lehman's middle market institutional distribution business and the minority stakes in external hedge fund managers.
COMMERCIAL REAL ESTATE ASSETS
- The bank plans to spin off to its shareholders $25 billion to $30 billion of its commercial real estate portfolio.
- The assets will be separated in a publicly traded company in the first quarter of 2009.
- The new company will be called Real Estate Investments Global.
- Lehman said the spin-off would strengthen its balance sheet and preserve the value of the commercial real estate portfolio for shareholders.
- It said REI Global would be appropriately capitalized through the transfer of common equity and provision of debt financing.
- REI Global's primary focus will be to maximize shareholder returns by selling assets or holding them to maturity.
- REI Global will not make investments in new assets, and any excess cash flow is expected to be returned to shareholders.