Global investment bank Lehman Brothers Holdings Inc. has released its preliminary third-quarter results – along with a plan of initiatives intended to dramatically reduce the firm's commercial real estate (CRE) and residential mortgage exposure, generate additional capital through the sale of a majority stake of the investment management division and reduce the annual dividend.
The company has reduced its residential mortgage exposure by 31% to $17.2 billion and reduced its CRE exposure by 18% in the third quarter from $39.8 billion to $32.6 billion. Additionally, Lehman Brothers intends to spin off to its shareholders $25 billion to $30 billion of its CRE into a separate publicly traded company, Real Estate Investments Global (REI Global), in the first quarter of 2009.
The spin-off of REI Global will strengthen Lehman Brothers' balance sheet while preserving the value of the CRE portfolio for shareholders, the company says. The concentration of positions in CRE-related assets has become a significant concern for investors and creditors.
The company also plans to sell a majority stake in a subset of its investment management division. The subset of businesses includes the asset-management, private-equity and wealth-management businesses, but it excludes its middle market institutional distribution business and the firm's minority stakes in external hedge fund managers.
Lehman Brothers reported a preliminary net loss of approximately $3.9 billion – or $5.92 per common share (diluted) – for the third quarter of this year, compared to a net loss of $2.8 billion – or $5.14 per common share (diluted) – for the second quarter of fiscal 2008 and net income of $887 million, or $1.54 per common share (diluted), for the third quarter of fiscal 2007.
Source: Lehman Brothers Holdings Inc.