re: Lehman Watch Thread

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The word is now out--MileHigh is a felon.

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Thank you sovereign wealth funds. Americans pay money for oil and imports, and the money flows right back into our companies, who hire more American workers, as well as into crappy U.S. debt securities that keep our economy humming with low interest rates.

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I'm still crossing my fingers hoping for Paulson to take over Fannie and Freddie and then chop them up into oblivion. Each piece must be hidden at the corners of the Earth/depths of the oceans, so that they may never be reconstituted under implicit government protection again.

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Shares in Lehman plunged as much as 44% in heavy trading Tuesday after Dow Jones reported that Korean regulators said talks between Lehman and the state-backed Korea Development Bank had ended.

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Lehman sinks as much as 40 percent on capital worry
Tuesday September 9, 1:15 pm ET
By Jonathan Stempel

NEW YORK (Reuters) - Lehman Brothers Holdings Inc (NYSE:LEH - News) shares sank as much as 40 percent Tuesday on concern that talks on a possible investment from Korea Development Bank had broken down and that the fourth-largest Wall Street investment bank would be unable to raise needed capital..

Shares began falling after a Dow Jones Newswires report that the chairman of South Korea's top securities regulator, Jun Kwang-woo, had said talks between Lehman and KDB had ended. A spokesman for the regulator denied the report, telling Reuters that Jun never made any such declaration.

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"The market fears that no one will inject capital in the company," said Nick Kalivas, equity market analyst at MF Global Research in Chicago.

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OPTIONS NARROW

Lehman Chief Executive Richard Fuld has been scrambling to raise capital as losses mount from its mortgage holdings.

The bank has been reviewing options for its Neuberger & Berman asset management unit, one of its healthier businesses, and some analysts expect it to spin off or dispose of much of its commercial real estate portfolio. Analysts have said Neuberger could fetch $7 billion to $8 billion in a sale.

Lehman had a second-quarter loss of $2.8 billion, or $5.14 per share. Analysts on average expect a third-quarter loss of $3.04 per share, according to Reuters Estimates.

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DEBT PROTECTION COSTS RISE

On Monday, Lehman said it expected to report third-results and discuss "key strategic initiatives" on September 18.

But Citigroup analyst Prashant Bhatia on Tuesday wrote that Lehman might announce the quarterly results as soon as today because of downward pressure on its shares.

The cost of protecting Lehman debt with credit default swaps rose to 450 basis points, or $450,000 annually for five years to protect $10 million of debt, from 325 basis points on Monday, according to Phoenix Partners Group.

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"People simply made the decision that they didn't want to be anywhere near this company because management was no longer in control of what was in the best interest of shareholders," he said.

(Additional reporting by Dena Aubin, Paritosh Bansal, Elinor Comlay, Joseph A. Giannone, Steven C. Johnson, Juan Lagorio and Richard Leong in New York; David Lawder and Rachelle Younglai in Washington, and Kim Yeon-hee in Seoul; Editing by John Wallace)

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