UPDATE 2-Lehman likely to make sizable asset sale, says UBS

miércoles 23 de julio de 2008 18:40 CEST

(Adds byline and analysts' comments; updates share price)

By Tenzin Pema

BANGALORE, July 23 (Reuters) - Lehman Brothers Holdings Inc LEH.N is likely to make a sizable asset sale, which may include a sale of its investment management unit Neuberger Berger, in a move to address problems, particularly those related to its asset exposures and potential client erosion, said analysts at UBS.

"While a sizable asset sale would remove some risk from Lehman's balance sheet, it would also generate a pretty big hit to book value (not sure on another capital raise), so there is no free lunch," wrote analysts Glenn Schorr and Mike Carrier in their note to clients.

The main issues plaguing the fourth-largest U.S. investment bank were its remaining "problem" asset exposures, fears over its client franchise, the less than favorable macro-economic backdrop as well as lingering concerns over the future structure of the industry, the analysts said.

"We think Lehman has a handful of potential scenarios it is working on which could alleviate the current pressure, but as with most things in life, timing is critical," wrote the two analysts.

These potential scenarios are: a sale of a significant block of risky assets worth more than $30 billion; a sale of the whole firm; privatization; a sale or initial public offering for Neuberger, which Lehman bought in 2003 for about $3.1 billion; a strategic partnership with a "very credible" partner; or a meaningful share buyback, Schorr and Carrier said.

"We feel the most likely scenario is the sale of a large block of risky assets, possibly in concert with the sale of Neuberger as a way to partially plug any hit to book value realized on the asset sale to possibly avoid another capital raise," the analysts said.

However, a sale would need to take place in weeks, and not months, as there could be an increasing supply of risk assets coming into the market as other financial firms look to offload risk as well, Schorr and Carrier said.   Continuación...