Lehman Cuts Dividend, Spinoff RE Assets

123jump.com Staff
10 Sep, 2008
New York City

Lehman Brothers reported largest quarterly loss ever of $3.9 billion and wrote down assets of $5.6 billion. The company said it has liquidity of $42 billion and has a plan to sell its asset management unit and spin-off real estate portfolio of between $25 billion and $30 billion by the first quarter of 2009. Lehman lowered its dividend to 5 cents a share form 68 cents a share and expects to save $450 million annually.

[R]9:45AM New York – Lehman Brothers reported largest quarterly loss in its history.[/R]

Lehman Brothers, once the largest mortgage securities dealer and underwriter reported its biggest quarterly loss ever. In the third quarter Lehman reported a loss of $3.9 billion after it wrote down assets of $5.6 billion after tax.

The company also lowered annual dividend to 5 cents per share from 68 cents and save $450 million annually.

Lehman lowered its residential mortgage portfolio by 31% to $17.2 billion and it will further decline to $13.2 billion after it completes the sale of $4 billion of residential mortgage portfolio to BlackRock Financial Management, Inc. Commercial real estate exposure by 18% to $39.8 billion.

The company plans spin off a portfolio of between $25 billion and $30 billion in the first quarter of 2009 as a separate company Real Estate Investments Global.

The troubled broker plans to see its asset management unit Neuberger Berman in an auction and spin off real estate related securities in a separate company that the company hopes to improve its tangible book value by $3 billion.

Lehman write-down includes $5.3 billion in residential mortgage securities and $1.7 billion in commercial real estate securities. Lehman quarterly revenue was a loss of $2.9 billion. These mark-to-market adjustments were offset by $800 million of hedging gains during the quarter and $1.4 billion of debt valuation gains. The Firm is also expected to record losses on principal investments of approximately $760 million.

At the end of the quarter the stock holder’s equity rose to $28.4 billion from $26.3 billion, net leverage ratio improved to 10.6 from 12.1 at the end of the second quarter. Gross leverage fell to 21.1 from 24.3 at the end of the second quarter. Liquidity at the end of the quarter was $42 billion.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 54.02 or 0.44% to 12,346.63, Hang Seng index in Hong Kong decreased 491.33 or 2.40% closed to 19,999.78.ASX 200 index in Australia decreased 74.60 or 1.50% to close 4,905.50. The KL Composite index in Malaysia decreased 5.85 or 0.55% closed to 1,062.70.

The Kospi Index in South Korea increased 10.48 or 0.72% to close at 1,464.98, SET index in Thailand closed lower 8.07 or 1.22% to 655.54 and JSE Index in Indonesia decreased 73.71 or 3.76% to 1,885.04. The Sensex index in India decreased 238.15 or 1.60% closed to 14,662.61.

Europe Markets Review

In London FTSE 100 Index traded lower 31.00 or 0.57% to 5,384.60, in Paris CAC 40 Index increased 11.47 or 0.27% to 4,304.81 and in Frankfurt DAX index traded lower 4.89 or 0.08% to 6,228.52. In Zurich trading SMI decreased 35.82 or 0.50% to 7,153.63.

Earnings Review

VeriFone Holdings, Inc, electronic payment technology provider said third quarter revenues rose 12% to $258.7 million from $231.7 million a year ago. Net loss in the quarter was $7.2 million or 9 cents per diluted share compared to net loss of $42.4 million or 51 cents per share, a year ago.

VeriFone Holdings, Inc ((PAY)) in the last one year traded as high as $50.00 in October 2007 and as low as $10.10 in April 2008. Based on the yesterday’s closing price the company has a market cap of $1.66 billion.

Stewart Enterprises, Inc, provider of funeral and cemetery products and services in the death care industry reported third quarter revenues rose 2.14% to $130.4 million from $127.6 million a year ago. Net income in the quarter rose 10% to $9.1 million or 10 cents per share compared to net income of $8.2 million or 8 cents per share, a year ago.

Comparable same store sales fell 39.7%.

Stewart Enterprises, Inc ((STEI)) in the last one year traded as high as $10.00 in September 2008 and as low as $5.37 in March 2008. Based on the yesterday’s closing price the company has a market cap of $846.43 million.