Lehman Plans Unit Sale After $3.9B Loss

Updated from 8:16 a.m. EDT.

Lehman Brothers(LEH Quote) on Wednesday said it plans to sell a majority stake in its investment-management division and take other capital-preserving measures as it expects to report a $3.9 billion third-quarter loss next week.

Lehman also said it plans to spin off its commercial real-estate assets into a new publicly-traded company and cut its annual dividend to 5 cents a share from 68 cents.

Lehman Brothers, set to officially report results Sept. 18, issued the warning after its shares fell 45% Tuesday amid speculation a prospective deal with Korea Development Bank to raise capital hit a snag and concerns mounted the firm would default on its debt.

Lehman's decision to sell an estimated 55% in several of its prized asset management businesses, including its prized Neuberger Berman unit, is likely to be viewed by many investors as a desperate act to shore up its capital position while sacrificing an important source of future revenues

The sale would include Lehman's proprietary asset management businesses, but not its stakes in external hedge funds, nor its middle market distribution business. The firm said it is "in advanced discussions with a number of potential partners" regarding the asset management stake sale and "expects to announce the details of the transaction in due course."

The commercial real estate spinoff involves $25 billion to $30 billion worth of assets, which will be listed in the first quarter of next year under the name Real Estate Investments Global. The spinoff allows Lehman to separate some of its riskiest assets from what are presumed to be its healthier businesses, such as advising on mergers and acquisitions and helping companies raise capital.