UPDATE 1-Lehman may sell securities, cut dividend: Bove
(Recasts; adds details, share movement)
Aug 6 (Reuters) - Lehman Brothers Holdings Inc LEH.N may sell $30 billion to $50 billion in securities to raise capital and slash its dividend by 90 percent, said Richard Bove, a prominent U.S. banking analyst.
Wall Street analysts have been contemplating a possible securities sale by Lehman, after Merrill Lynch & Co Inc MER.N sold more than $30 billion of its risky securities at a fire-sale price last week.
Lehman's security sale is likely to include commercial mortgages and some residual holdings in residential mortgage-backed securities, Ladenburg, Thalmann & Co's Bove wrote in a research note to clients.
"The quality of this paper is believed to be significantly higher than the 'sale' recently announced by Merrill Lynch. Therefore, the discount may be as little as 10 percent."
Lehman is also likely to announce the spin-off of 20 percent of its asset management business, Neuberger Berman, Bove said.
He valued Neuberger at $1.3 billion, assuming the firm earns $1 billion pre-tax and is worth 20 times post-tax earnings. If 20 percent is spun off, Lehman would retain shares worth $1.0 billion, Bove said.
Lehman may issue $2 billion preferred stock and $1 billion in long-term debt to meet its remaining capital needs, the analyst added.
To pay the expected new dividend requirement on the preferred stock, the company would need to virtually eliminate its current dividend on its common stock, which is costing it $400 million a year, Bove said. Continuación...