|
London: Lehman Brothers Holdings on Monday announced plans to raise $6 billion to bolster its capital base after losses from trading and hedging led to an expected $2.77 billion second-quarter loss.
Wall Street's smallest major investment bank said it expects to offer common stock and convertible preferred stock through public offerings, diluting existing shareholders.
Shares of Lehman fell 7.7 per cent to $29.80 in premarket trading. Moody's Investors Service said the securities offerings include $4 billion of common stock and $2 billion of preferred stock automatically convertible into stock after three years.
Questions about Lehman's health have soared in recent months after the global credit crisis led to the collapse of smaller rival Bear Stearns Cos, which was acquired for a fire-sale price at the end of May by JPMorgan Chase & Co.
"It's not all gloom and doom, but certainly not brilliance from Lehman," said Angus Campbell, head of sales at Capital Spreads.
Lehman, based in New York, projected a second-quarter loss attributable to common shareholders of $2.87 billion, or $5.14 per share, for the quarter that ended May 31.
That compared with the average analyst forecast for a loss of 38 cents, according to Reuters Estimates. Net write-downs in the quarter totalled $3.7 billion, mostly related to residential and commercial mortgages, Lehman said.
The loss compared with a profit of $1.26 billion, or $2.21 per share, a year earlier, and $465 million, or 81 cents per share, in the first quarter.
Net revenue is expected to be negative $668 million, compared with positive $5.51 billion a year earlier, Lehman said.
"I am very disappointed in this quarter's results," chief executive Richard Fuld said in a statement. He said the company has nevertheless strengthened its balance sheet since March, and is "well positioned" to execute its business strategy.
Lehman said capital market operations are expected to report quarterly negative revenue of $2.37 billion, compared with positive $3.59 billion a year earlier.
Outlook: Moody's lowers rating
Moody's lowered its outlook on Lehman's "A1" senior debt rating to "negative" from "stable." It nevertheless called the capital-raising "a positive step in bolstering both the balance sheet and investor confidence."
Lehman said it reduced gross leverage to below 25 times from 31.7 times at the end of its first quarter. It said it has also cut exposure to residential mortgages, commercial mortgages and real estate investments 15 per cent to 20 per cent each.
|
