Lehman to Offer Preferred Stock

It will issue 3 million shares of convertible preferred stock.
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Lehman Brothers

(LEH)

plans to offer 3 million shares of convertible preferred stock in an effort to boost its capital and increase its financial flexibility.

The New York-based investment bank said Monday it could issue up to 450,000 additional shares to cover any overallotments.

"Given the challenging environment and our previously stated view that it will likely continue

for the balance of the year, issuing convertible preferred is appropriate as it optimizes our funding and accelerates our plan to reduce leverage, and at the same time minimizes dilution to our shareholders," said Erin Callan, managing director and chief financial officer of Lehman and a member of the firm's executive committee. "We also felt this was the right time as there was a window of opportunity in the market, as we have received significant interest from several key institutional investors."

Lehman,

which has been fighting off speculation

that it's facing a liquidity crunch, said the preferred stock will be convertible into common shares, plus cash in lieu of fractional shares. The noncumulative dividend rate, conversion rate and other terms haven't been determined.

Shares of Lehman slipped 0.6% in regular trading, but fell 3% in late action.

This article was written by a staff member of TheStreet.com.