Lehman May Raise New Capital

BANGALORE (Reuters) – Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research) may raise billions of dollars of fresh capital, suggesting the investment bank will post its first quarterly loss since going public, the Wall Street Journal said on Tuesday, citing sources familiar with the matter.

Analysts and Wall Street executives estimate it might total $3 billion to $4 billion, the newspaper said.

Lehman may issue common stock, diluting current shareholdings, and will probably reveal its capital plans when it reports quarterly results the week of June 16, the WSJ said.

Lehman's market value is about $18.7 billion, based on Monday's closing stock price of $33.83, Reuters data shows.

The report sparked selling in the U.S. dollar and weighed on Asian stocks, while boosting demand for safe-haven government bonds such as U.S. Treasuries.

“The developments are a reminder to markets that the effects of the credit crisis continue to reverberate around markets,” said Zurich-based UBS currency strategist Geoffrey Yu in a note to clients.

According to recent analysts research notes, Lehman has been hurt by hedges used to offset losses in various securities.

Second-quarter losses from asset writedowns and ineffective hedges are likely to top $2 billion, the newspaper said. The bank will also realize losses tied to job cuts, the WSJ said, citing a person familiar with the matter. 

BANGALORE (Reuters) – Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research) may raise billions of dollars of fresh capital, suggesting the investment bank will post its first quarterly loss since going public, the Wall Street Journal said on Tuesday, citing sources familiar with the matter.

Analysts and Wall Street executives estimate it might total $3 billion to $4 billion, the newspaper said.

Lehman may issue common stock, diluting current shareholdings, and will probably reveal its capital plans when it reports quarterly results the week of June 16, the WSJ said.

Lehman's market value is about $18.7 billion, based on Monday's closing stock price of $33.83, Reuters data shows.

The report sparked selling in the U.S. dollar and weighed on Asian stocks, while boosting demand for safe-haven government bonds such as U.S. Treasuries.

“The developments are a reminder to markets that the effects of the credit crisis continue to reverberate around markets,” said Zurich-based UBS currency strategist Geoffrey Yu in a note to clients.

According to recent analysts research notes, Lehman has been hurt by hedges used to offset losses in various securities.

Second-quarter losses from asset writedowns and ineffective hedges are likely to top $2 billion, the newspaper said. The bank will also realize losses tied to job cuts, the WSJ said, citing a person familiar with the matter. 

In April, Lehman Chief Executive Richard Fuld had said “the worst is behind us”, in light of improved client trading activity and investor sentiment.

Two months ago, Lehman sold $4 billion of preferred shares, a stock-bond hybrid. In early May, Lehman sold $2 billion of 30-year bonds.

Lehman is no stranger to worries about its cash problems. In 1998, Fuld had to fight off concern about Lehman's survival after the Long Term Capital Management hedge fund collapsed.

Raising new capital may help Lehman reassure investors who have in recent months questioned whether it might suffer the same fate as Bear.

Since the Federal Reserve began allowing investment banks to borrow directly, Lehman has accessed overnight financing several times, and fears of a broad market collapse have lessened.

Still, the credit crisis is expected to keep haunting markets. “Credit turmoil should persist though the market reaction might be less pronounced,” said Thomas Lam, senior Treasury economist with United Overseas Bank in Singapore.

Last month, David Einhorn of Greenlight Capital Inc, who has sold Lehman shares “short” because he expects a decline, told investors that Lehman should raise large amounts of capital because it has not taken enough write-offs for bad assets.

By Varsha Tickoo and Tenzin Pema

(Additional reporting by Satomi Noguchi in Tokyo and Kevin Plumberg in Hong Kong)

(Editing by Louise Ireland)