Lehman Bros raises $4bn in share sale

 

Lehman Brothers, the Wall Street investment bank rumored to be in financial straits, on Tuesday said it had raised $4 billion (Dh15 billion) from a special share offering.

 

Lehman Brothers Holdings Inc said in a statement that it had priced a $4-billion offering of four million preferred shares.

 

The bank said it had raised its offer of three million shares, announced late Monday, "after receiving substantial interest from several key long-term clients and institutional investors."

 

The proceeds from the offering will be used to bolster capital and increase financial flexibility.

 

"The significant oversubscription for this deal demonstrates the confidence that investors have in Lehman Brothers," said Erin Callan, managing director and chief financial officer of Lehman Brothers.

 

Callan said that the success of the transaction also reflected the firm's strength "as we continue to successfully weather challenging environments."

 

Shares in Lehman jumped 10.81 per cent to $41.71 around 1440 GMT in New York.

 

The preferred shares will be convertible at any time, at the option of the holder, into 20.0509 shares of common stock, at an initial conversion price of approximately $49.87 per common share, the bank said.

 

The stock closed on Monday at $37.64.

 

Following the collapse of Wall Street peer Bear Stearns and its dramatic Federal Reserve-backed takeover by JPMorgan Chase on March 9, Lehman Brothers regularly has been the object of media speculation that it may be the next domino to fall in the mortgage-related global credit crunch.

 

Lehman's successful cash raising came as Swiss banking giant UBS announced $19 billion (Dh70 billion) in writedowns related to the credit crunch that stemmed from subprime, or high risk, US mortgages, the biggest single subprime hit worldwide.

 

UBS said it expects a net loss of 12 billion Swiss francs ($11.8 billion) for the first quarter this year and wanted to raise 15 billion Swiss francs ($14.8 billion) of new capital.

 

The US agency Fitch Ratings downgraded its rating outlook on Lehman Brothers to negative from stable, citing "increased earnings pressure."

 

Fitch noted that the bank's long-term debt had climbed to 146.8 billion dollars, of which $18.5 billion becomes due this year. (AFP)