West Palm Beach (HedgeCo.net) – Lehman Brothers, Wall Street’s fourth biggest investment bank has filed for bankruptcy, making it the largest and highest-profile casualty of the global credit crisis, with approximately $639 billion in assets.

The bank said the Chapter 11 filing will not include its broker-dealer operations and other units, including Neuberger Berman. Lehman is looking at selling its broker-dealer operations, and is still in advanced discussions with a number of potential buyers of its investment management division.

Investors in recent weeks had grown increasingly jittery about Lehman’s $46 billion of mortgages and asset-backed securities, as well as its credit rating and its ability to raise capital. 

Bankruptcy also represents a bad end to Chief Executive Dick Fuld’s four-decade career at Lehman. Fuld, who piloted the investment bank through prior crises with aplomb, was widely seen as too slow to recognize Lehman’s need to raise capital and shed bad assets.

Lehman listed its biggest unsecured creditors as Citigroup Inc, Bank of New York Mellon Corp, Aozora Bank, and Mizuho Financial Group Inc. Citi and Bank of New York Mellon are trustees for Lehman bonds.

The firm said that as of May 31, it owed about $110.5 billion on account of senior unsecured notes, about $12.6 billion on account of subordinated unsecured notes and about $5 billion on account of junior subordinated notes.

Alex Akesson

Editor for HedgeCo.Net
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New York (HedgeCo.Net) – Despite valiant efforts to find investors and stay afloat the credit crisis, Lehman Brothers Holdings Inc. is now at the center of the biggest bankruptcy filing in history.

The fourth-largest investment bank filed for Chapter 11 protection in a Manhattan court today, after write downs stemming from the subprime mortgage fall-out that it helped create proved to be too much to take.

Lehman, who was the largest underwriter of mortgage-backed securities, listed over $613 billion in debt, including over $157 billion owed to unsecured creditors and over $155 billion owed to bondholders.

"The uncertainty, particularly among the banks through which the company clears securities trades, ultimately made it impossible for the company to continue to operate its business,” said Chief Financial Officer Ian Lowitt in the filing.

Shares of Lehman were trading as low as 29 cents this morning; a fitting finale after losing 94 percent of its market value this year. Treasury Secretary Henry Paulson and the Federal Reserve had been trying to come up with a deal that would keep Lehman afloat. Paulson made it clear that he did not want to use taxpayer money to bail out Lehman.

While London-based Barclays looked to be interested in investing in Lehman, they pulled out yesterday amidst concerns over the lack of guarantees from the U.S. government to protect against losses on assets. Bank of America then followed suit, withdrawing from talks with Lehman only to acquire Merrill Lynch shortly thereafter.

Lehman was planning on selling a majority stake in their asset-management unit for around $4 billion.  While talks are still in the works, no conclusion has been reached. Speculations that more losses were to come coupled with its liquidity crunch have prevented any sale from taking place as of yet and ultimately led to the demise of the bank.

Lehman now joins Bear Stearns and Merrill Lynch in the group of banks that were "too big to fail,” that couldn’t weather the credit crunch.

Lehman’s assets are listed at $639 billion. They have about 25,000 employees worldwide.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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International Herald Tribune- Samuel Israel 3rd bilked his investors out of $250 million, but they are hoping to recoup some of their money from one of Wall Street’s deepest pockets: Goldman Sachs.

Bayou’s creditors were taking aim at Goldman even before Israel, the former manager of the Bayou Group hedge fund firm, surrendered to the authorities on July 2. His faked suicide on a Hudson River bridge 40 miles north of Manhattan and subsequent disappearance on the day he was to start a prison term had set off an international manhunt.

Bayou’s unsecured creditors committee sued Goldman in late May, claiming the investment bank had failed to detect Israel’s fraud, one of the biggest ever in the hedge fund industry, and to investigate signs that something was amiss at Bayou.

For six years, Goldman acted as the so-called prime broker for Bayou, clearing trades, taking custody of securities and providing reports on the fund firm’s investments. The claim seeks $20 million.

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