Lehman Brothers Scrambling for Buyer

Lehman Brothers is talking to potential buyers, as Treasury Secretary Henry Paulson says no federal money would be involved.
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Updated from 12:03 p.m. EDT

Lehman Brothers

(LEH)

continued to sink Friday, as reports say the besieged bank investment bank was seeking a buyer with federal help.

Treasury Secretary Henry Paulson was "adamant" that no government money would be part of any deal to resolve the situation, the

Associated Press

reported, citing a source familiar with Paulson's thinking. The

Federal Reserve

backstopped $29 billion worth of illiquid mortgage-related securities from

Bear Stearns

when it brokered a deal to

JPMorgan Chase

(JPM) - Get Report

in March.

Like Bear, Lehman's fortunes are strongly connected to the real estate and fixed-income markets, which has been at the center of the current economic crisis. The Fed gave investment banks the ability to borrow directly from the federal government at a discount in March, shortly after the JPMorgan deal.

Lehman shares were recently down 14.9% to $3.59 on the New York Stock Exchange, signaling it was well on its way to a fifth straight day of losses. The stock closed trading at $16.20 on Sept. 5, and the shares are off 90% from their 52-week high.

CEO Richard Fuld began actively shopping the entire firm after the market's sour response to

Lehman Brothers'

capital preservation plan unveiled Thursday morning,

CNBC

reported Thursday, citing sources close to the firm.

The Financial Times

is reporting that

Bank of America

(BAC) - Get Report

, private equity firm JC Flowers & Co. and China Investment Co. could be weighing a joint bid.

Barclays

(BCS) - Get Report

and

HSBC

(HBC)

have also been cited elsewhere as possible buyers.

Lehman, after several days of losses, said Wednesday that it would sell a majority stake in its asset-management business, 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.

Goldman Sachs, Oppenheimer & Co., Banc of America Securities and Citigroup all downgraded the stock Thursday morning, sending shares spiraling downward 41% to $4.25.

"Management did not successfully put to rest the issues that had been pressuring the stock," Goldman analyst William Tanona wrote.