Bulls, Bears & Bucks #20: Lehman failliet, Merrill overgenomen

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Battered insurer AIG’s $20bn asset sale
Dominic Rushe in New York
AIG, the world’s largest insurer, is planning a $20 billion (£11 billion) asset sell-off as it fights to correct a record slump in its share price and braces for the impact of Hurricane Ike.

Details of the plans could come as early as tomorrow. On Friday the insurer appointed investment bank JP Morgan to work on a rescue plan after its shares fell a record 31% in a single day.

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The chicken game over Lehman
After propping up the financial system for more than a year, the government seems to be drawing the line - and for good reason.


NEW YORK (Fortune) -- A crew of top federal officials has spent the past year racing from one fire to the next in a harried effort to smother financial blazes that keep inflaming the markets and threatening the rest of the economy.

But after disgorging billions in taxpayer funds and effectively taking over three big companies, the emergency response team has apparently changed its tactics when it comes to Lehman Brothers (LEH, Fortune 500).

Just a week after they effectively nationalized mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), and six months after they financed a hasty takeover of Bear Stearns, the Federal Reserve and Treasury are delivering Wall Street a different message: you'll have to learn to save yourselves.

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Op zondag 14 september 2008 19:06 schreef HansAEX het volgende:
NYT NEWS ALERT: Barclays Says It Has Walked Away From Talks With Lehman

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Bank of the Year for Credit Derivatives: Lehman Brothers
02-10-2006

Lehman Brothers’ pioneering spirit has put the firm at the forefront of credit derivatives product design and market development. By continuing to foster that spirit, it has secured this year’s award.

In the past year, Lehman developed the first ever rated synthetic equity structure that enables traditional investors who need a rating to access cheap equity.

The structure takes advantage of the relative value of junior parts of the capital structure while providing protection to return against defaults. To date, $2bn of risk has been placed and the new issue pipeline is strong.

“With these kinds of products, we have made it easier for more traditional types of investors, such as money managers and insurance companies, to invest in the structured area for the first time,” says Lisa Watkinson, global head of structured credit business development at Lehman Brothers.

Lehman also pioneered the development of preferred credit default swaps, in which it has traded more than $8bn across more than 60 counterparties, and on which it has based a series of innovations. In September 2005, it introduced a new layer of the capital structure to the credit derivative index market with the launch of PDX, an index referenced to 40 issuers of preferred securities; it has broadened the investor base in the hybrid markets and created a homogenous and liquid pricing/hedging benchmark.

“The cornerstone of our business is the research platform,” says Ms Watkinson. “This enables Lehman Brothers to be prudent and conservative risk managers but innovative in our structuring. And this enables us to tap into new investor bases.”

The judges were particularly impressed with the way Lehman’s investment bankers work with clients to structure solutions. One client praised a complex and highly innovative transaction that Lehman undertook for his firm, in which it simultaneously had to raise capital efficient financing, structure a synthetic collateralised debt obligation (CDO) and raise third-party assets under management.

In the coming year, Ms Watkinson believes that the continued application of CDO technology to synthetic assets will help to drive the market. “Loan-only derivatives will be a huge growth area for Lehman Brothers and the market,” she says. “Such products bring in new investors by allowing us to tap into an asset class that was previously not liquid enough.”

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Op zondag 14 september 2008 19:22 schreef HansAEX het volgende:
Of die man ook een parachutte meekrijgt moet nog blijken vanavond ;-)

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Op zondag 14 september 2008 19:59 schreef Billary het volgende:
Interessante dag morgen..

US heading for Depression?

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Sept. 14 (Bloomberg) -- A group of banks and brokers began preparing for a potential Lehman Brothers Holdings Inc. bankruptcy filing today, addressing outstanding trades that the company has in over-the-counter derivatives markets.

Financial firms have started ``netting'' Lehman trades on credit, equity, interest-rate, foreign exchange, and commodity derivatives, according to a statement from the International Swaps and Derivatives Association e-mailed to Bloomberg News.

``ISDA confirms a netting trading session will take place between 2 p.m. and 4 p.m. New York time for over-the-counter derivatives,'' the ISDA said. ``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008. If there is no filing, the trades cease to exist.''

The announcement came after Barclays Plc, the U.K.'s third- biggest bank, said it abandoned talks to buy Lehman, contending it couldn't obtain guarantees to protect against potential losses at the U.S. securities firm.

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FACTBOX: Possible outcomes for Lehman Brothers

The Federal Reserve Bank of New York, the U.S. Treasury, the Securities and Exchange Commission and a group of major banks were meeting on Sunday to determine the fate of Lehman Brothers Holdings Inc.

Lehman, once the fourth-largest U.S. investment bank by market capitalization, has lost the confidence of investors as its balance sheet sags under the weight of more than $46 billion of mortgage-backed and asset-backed securities.

Below are the options being considered for Lehman, according to people briefed on the matter and a restructuring expert:

A buyer steps in, with no government support. This is the preferred option for the Federal Reserve and the Treasury, which fear that supporting too many wobbly investment banks will encourage excessive risk taking.

Other major U.S. banks would likely agree to help finance Lehman's bad assets under this scenario. But working out who would finance how much would be difficult. Weaker banks have little capital to spare, while stronger banks would resist being penalized for playing the credit crisis well.

The lack of government support for Lehman could cause a painful and fast reassessment of credit risk in the U.S. financial system. Many banks and investors have been trading normally with investment banks, under the expectation that the U.S. government would support any that went out of business. If the government shows it is unwilling to provide support, other dealers could find themselves with little business, and perhaps even on the brink of bankruptcy.

A buyer steps in, with government support. The preferred option for major U.S. banks and prospective buyers, which believe they should not have to pay for Lehman's sins, but that Lehman's demise may create systemic risk.

In this scenario, the government would likely support Lehman's bad assets, much as it did when JPMorgan Chase agreed to buy Bear Stearns in March. In that deal, the government agreed to guarantee $29 billion of assets.

But the government would add to the risk on its balance sheet, after bailing out Fannie Mae and Freddie Mac, and supporting JPMorgan's purchase of Bear Stearns. The government's mounting exposure to bad assets may erode investor confidence in Treasuries and the dollar.

Nothing is resolved by Monday. Most major Asian markets are closed, but European and U.S. markets will likely panic. Dealers will likely try to rapidly unwind their positions with Lehman across many products, and accessing short-term financing through the repo markets will be difficult.

Lehman reported $42 billion of liquidity at its holding company as of the end of August, and can pledge additional assets to the Federal Reserve, but it is difficult for any financial company to survive if investors lack confidence in its ability to do so.

Lehman files for bankruptcy: When this would happen is not clear, but in the absence of a rescue plan, the 158-year old firm would likely have no other choice. Bankruptcy would allow the orderly sale of Lehman's assets. Lehman would want the process of preparing for bankruptcy and getting through the process to take as little time as possible, because the longer it takes, the lower the value of its franchise.

Going into the bankruptcy process with an already-developed plan for liquidating assets would make the most sense as it would ensure the company is in bankruptcy for as little time as possible.

There are two options that involve filing for bankruptcy with a plan in place: a "prepackaged bankruptcy," where creditors and equity holders have already approved the plan, and a "prenegotiated bankruptcy," where leading stakeholders have negotiated a plan but have not received approvals from the requisite number of creditors and equityholders.

Of those options, a prenegotiated bankruptcy may be preferable, because it requires less preparation time before filing for bankruptcy.

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Bank of America, Merrill Lynch In Merger Talks

Bank of America and Merrill Lynch & Co. Inc. are in merger discussions, according to people familiar with the matter.

The talks come amid a Wall Street scramble to sort out a potential liquidation of Lehman Brothers Holdings Inc.

Bank of America had considered buying Lehman, but when those talks failed to result in a deal, BofA turned its attention to Merrill, which is considered a better fit for the bank.

Much remains uncertain and conditions were fluid.

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Op zondag 14 september 2008 22:27 schreef ItaloDancer het volgende:
En het laatste nieuws op NOS TT is "Open Monumentendag druk bezocht", niets over dit alles