Its not all over for LEH, yet

Lehman Tries to Sell Pieces to Barclays By JEFFREY MCCRACKEN, MATTHEW KARNITSCHNIG, CARRICK MOLLENKAMP and SUSANNE CRAIG September 15, 2008 9:18 p.m. Lehman Brothers HoldingsInc. was last night negotiating a last-minute plan to sell large portions of itself to Barclays PLC, the UK bank that has been circling the U.S. investment house. Barclays Americas chairman Archibald Cox was leading the talks, and an agreement is hoped to be reached by Tuesday, said a person involved in the talks. Lehman’s top executives were huddled at the bank’s Manhattan headquarters trying to craft a plan that would preserve many Lehman jobs and operations, say people briefed on the discussions. A deal was not certain, and many open questions remain. Chief among them: The fate of Lehman’s toxic mortgage-security and real estate assets, as well as the price that Barclays might pay for Lehman, whose holding company is now in Chapter 11 bankruptcy protection. That structure allows it to sell off other assets without liquidating, and gives it additional time to reach an agreement. Still, a last-minute deal might come off as a well-received rescue of a bank that was on the verge of disappearing on Monday. The transaction being contemplated would fold Lehman’s core business – underwriting stocks and bonds, providing merger advice, and securities trading – into Barclays, UK’s third-largest bank. Time is of the essence for Lehman, whose main assets – its people – are rapidly walking out its doors. “The assets will be moved as soon as possible. This is the quintessential melting ice cube,” said one person working on the Lehman bankruptcy. Barclays was not expected to take on Lehman’s foreign operations, which have been growing in recent years in both Europe and Asia. The talks underscore how eager Barclays President Robert E. Diamond Jr. is to expand in the U.S. even at the risk of exposing the British bank to integration challenges and risk at a highly tenuous time in banking. Barclays also faces ongoing questions about the ways it is accounting for its exposure to risky assets. Bank officials have defended their books, most recently in August when it reported mid-year results. Mr. Diamond, who turned Barclays Capital, the investment-bank arm of Barclays, into a European fixed-income power, has worked to increase the firm’s business in the U.S. in areas such as real estate banking. But the firm still lacks heft in the U.S. At the same time, Barclays Chief Executive John Varley more recently has preferred to pitch the idea of Barclays growing others areas of its business, including retail banking in areas such as Russia. Barclays could have a leg up in its due diligence of Lehman’s books. The co-head of Barclays Capital real-estate capital markets business is Michael Mazzei, who joined the bank from Lehman in 2004. Before departing Lehman, Mr. Mazzei was co-head of the real-estate investment banking group. The banker also helped create Lehman’s commercial mortgage-backed securities business in 1986. A Barclays spokesman declined comment. Lehman’s $639 billion in assets makes it far and away the largest U.S. bankruptcy ever, according to bankruptcydata.com. The previous largest was the 2002 filing of Worldcom, which had assets of $103.9 billion. And by filing for Chapter 11 bankruptcy protection at the holding-company level, Lehman Brothers set up a process designed to give it a little more time and control over what happens to its various assets – both the good and bad ones. Over the past few days, the federal government made it clear to Lehman that it did not want the broker-deal business to go into a Chapter 7 bankruptcy. Such a move would put the operation in the federal government’s hands. The government felt Lehman’s broker-dealer business currently had enough liquidity to keep on running without bankruptcy, said people briefed on the matter. A government-run liquidation of Lehman’s sizable broker-dealer business could unsettle financial markets because customer accounts are frozen for a period of time while a trustee is appointed to manage and liquidate the process. As Lehman was scrambling to find a buyer, bankers at the firm were also proceeding with a previously announced sale of the investment management unit. The firm hopes to have a sale of this unit wrapped up this week and the auction is now between private equity firms Bain Capital and Hellman & Friedman, Clayton Dubilier & Rice, according to people familiar with the matter. Any sale will now require a seal of approval from the bankruptcy judge overseeing Lehman.

Barclays bought it!!! Hope they don’t fire people. BARC has no exposure to equities in the US. So hopefully, the employees will be safe.

I was just thinking that it might make sense to buy a little LEH now as a Hail Mary pass. Can’t be too much, though, since the chance of losing 100% is pretty high.

Whoa - it’s a Hail Mary pass into the stands. They are disposing of assets because that’s why they filed a Chapter 11 filing. It’s very doubtful that there will be any attempt to come out of Chapter 11.

barclays just went directly onto the leh trading floor and announced theyre keeping most (if not all?) of the lehman traders… says a source at leh

I figured chapter 11 meant that there would be reorganization and possibly a functioning organization on the other end, particularly if there is a buyer.

BARC got the LEH corporate building (the one near times square) for $1.5 billion and the broker dealer business for $250 million. Talk about a bargain.

woah - this all seems like good news

jalmy8 Wrote: ------------------------------------------------------- > woah - this all seems like good news Yep. Approximately 9,000 jobs saved.

bchadwick Wrote: ------------------------------------------------------- > I figured chapter 11 meant that there would be > reorganization and possibly a functioning > organization on the other end, particularly if > there is a buyer. Nope. It just means that LEH feels they can do a better job liquidating than a court appointed trustee

These are good news for a sizable number of employees. From WSJ.COM: Barclays PLC has reached an agreement to buy the U.S. investment bank and capital-markets businesses of Lehman Brothers Holdings Inc. and as many as 9,000 Lehman employees will find jobs with the U.K. bank, according to people familiar with the situation. Barclays won’t be buying any of Lehman’s real estate, real-estate-backed securities, derivatives positions or over-the-counter trades. Lehman’s European business will remain in bankruptcy proceedings. Lehman also is in separate talks to sell its investment-management unit to private-equity bidders.

Yahooo!!! Got an email from Dick Fuld saying equity research is part of the business that was bought by Barclays. Now I hope Barclays doe’snt fire my group. From what I have heard it does’nt seem likely that LEH research will have lay-off’s. Keeping fingers crossed.

fingers crossed to all you lehman staff.

Good news sid. I am really happy for you and the rest of LEH crew.!

Any insider knows this unit Lehman Brothers First Trust Income Opportunity Fund (http://www.lbftincomeopportunity.com/lbc/index.aspx) is under Chapter 11?

comp_sci_kid Wrote: ------------------------------------------------------- > Good news sid. I am really happy for you and the > rest of LEH crew.! Thanks CSK. How are things with you at MER? Hope things work out there too.

Hope things get back to normal for you guys soon. It really looks like barclays moving at a good pace on this.

ymmt Wrote: ------------------------------------------------------- > Hope things get back to normal for you guys soon. > It really looks like barclays moving at a good > pace on this. They had to else they would be buying only the infrastructure as LEH employees are jumping ship very fast. Some of the senior research analysts are very close in moving their entire teams to other banks. For employees like me who are on a work visa, this is a big, big relief. Now next battle is to get our visa’s transferred to Barclays, ASAP, by doing premium processing so that October 1, 2008 it is business as usual and I can prepare for third quarter earnings and the late nights that go with it.

I am now a Barclays employee. Woohoo!

I hear that Barclay’s anted up $6 for Pimp’s expertise. j/k - Congrats! I’m really glad you guys are okay.