Lehman to raise $6 billion to fix loss
The forecast would be the first quarterly drop for the investment bank since going public in '94.
NEW YORK - Lehman Bros. Holdings Inc. confirmed fears on Wall Street yesterday that the credit crisis was not quite over, and it left investors to wonder if other major investment banks faced the same set of risks.
Lehman said it would raise $6 billion in new capital to shore up its balance sheet, and it forecast an unexpectedly large second-quarter loss of nearly $3 billion.
It would mark the first quarterly loss for Lehman since it went public in 1994.
Shares of the nation's fourth-largest investment bank fell $2.81, or nearly 9 percent, to $29.48 amid mounting concerns about its exposure to the mortgage market.
Analysts were quick to react to Lehman's announcement, with credit-rating agency Moody's Investors Service's lowering its outlook on the firm.
The raising of new capital is a move many of Lehman's competitors have already been forced to make.
The announcements, made before the official June 16 release date of Lehman's results, were an attempt to calm a market still badly shaken by the near collapse of the Bear Stearns Cos. Inc. in March. Analysts were disappointed that Lehman's loss was much deeper than they expected, and felt it could have an impact on rivals.
"There is a broader element to all this," said David Trone of Fox-Pitt Cochran. "Management considered this to be an aberration, but I think you'll see similar results in form and structure, just the magnitude will be smaller."
Lehman said it expected to lose $2.87 billion, or $5.14 a share, for the period ended May 31, compared with the $1.3 billion, or $2.21 a share, it made in the year-earlier period. Analysts had expected the company to report a loss of just 22 cents a share for the period, according to Thomson Financial.
CEO Richard Fuld said he was "very disappointed" in the quarterly results. However, he believes the additional capital - raised through a securities sale to yet unnamed investors - would help keep the company whole amid continued market turmoil.