Barclays

Who's paying the most for capital?

Jim Kim — Tue, 18 Nov 2008 21:06:11 -0500

The capital raising frenzy that Wall Street embarked on this year has been nothing short of phenomenal, Breakingviews notes that the capital raises took various forms--"an elaborate concoction of preference shares, warrants, convertible bonds, ratchets, cap-and-collars and other innovative instruments, as well as issuing plain old equity." Every company has a unique set of circumstance, which results in different costs.

So who is paying the most? Breakingviews offers an interesting ranking that has Morgan Stanley at the top of the heap. It's paying 9 percent on $9 billion preferred shares bought by Mitsubishi UFJ. These shares convert into shares valued at $25.25 when the common hits $37.88. Assuming a 10 percent average annual stock gain a year, Morgan's effective rate would be 17 percent. Goldman is not far behind with its deal with Warren Buffet. Same goes for Barclays and its deal with Abu Dhabi and Qatar.

For more:
- here's the Breakingviews article

The end of Lehman culture?

Jim Kim — Wed, 17 Sep 2008 13:43:14 -0400

TheDeal.com is a bit mystified, as are we, that some investment banking employees of Lehman Brothers are actually unhappy with the news that Barclays will buy their firm. In their view, the cultural fit is not a good one. All I can say is that I'm impressed with the cultic level of loyalty some Lehman-ites have demonstrated. Some wanted to buy more stock as the ship sank to demonstrate their faith. They really, truly thought the firm would survive the crisis. Of course, there are others selling their office furniture on eBay. Hey, people still have to eat. Mortgages have to be paid. In the end, I'm not sure the Lehman culture was any different than the others. But for what it's worth, here's a parting memo from a Lehman manager posted by the New York Times' DealBook.

For more:
- here's the item from TheDeal.com

Related Article:
Jamie Dimon visits Bear Stearns

Barclays buys Lehman investment bank at a firesale price

Jim Kim — Wed, 17 Sep 2008 07:35:55 -0400

Fulfilling its goal of expanding into investment banking in the U.S., Barclays was able to ink a once in a lifetime deal. It bought Lehman Brothers' investment bank for a paltry $1.75 billion. About $1.5 billion was accounted for by Lehman's midtown building and two data centers, which means that the rest, the actual know-how, was deemed to be worth just $250 million. That includes the vaunted bond operation. Hopefully, this will save many of the 8,000 to 10,000 employed by the bank. After the news was delivered on the trading floor, God Save the Queen was played over the announcement system, notes the New York Times. Lehman is still aiming to sell its investment properties.

For more:
- here's the article

Barclays interested in Lehman's investment banking unit

Jim Kim — Tue, 16 Sep 2008 10:10:13 -0400

Barclays walked away from a deal to buy the whole of Lehman Brothers, but it is still interested in the investment banking unit, according to the Financial Times. Apparently, Barclays execs were later approached about an alternative deal for units that are not part of the bankruptcy proceeding. In a sense, this is a historic opportunity to buy a solid property at a rock bottom price. This is assuming that no one else will be interested. This might be the best "out" for Lehman. Bankers will remain employed, which can't be said of many others on Wall Street. Would the Lehman brand survive? I doubt it, but who knows.

For more:
- here's the article

Lehman Brothers, RIP

Jim Kim — Sun, 14 Sep 2008 21:48:16 -0400

Wow! What else is there to say? In an extraordinary weekend, Wall Street has been remade. We've written recently that Lehman Brothers was another Bear Stearns. But it's even worse. It was forced into bankruptcy despite a frantic weekend of negotiating among top regulators and Wall Street execs. In the end, the government sealed Lehman's fate--and indirectly Merrill Lynch's. You cannot argue with Henry Paulson's decision not to extend the same backing for a potential Lehman deal that the government did to JPMorgan's deal for Bear Stearns (some $30 billion in assurances). At some point, someone had to end the moral hazard. At the same time, without such assurances, you can't blame Barclays and Bank of America for walking away, which left death as the only option for storied Lehman Brothers. Incredible.

For more:
- here's the AP overview
- Lehman employees already in a Bear Stearns-like situation. Article
- Bank of America, Lehman, could it have been a natural fit? Article
- Lehman has decided not to provide coffee for camped-out reporters
- the last minute options. Article

Related Article:
Lehman Brothers, another Bear Stearns after all

So what to make of the Lehman news?

Jim Kim — Wed, 10 Sep 2008 21:20:11 -0400

Lehman Brothers' news was designed to quell market fears. It really is being whipped around by extreme stock and CDS action. But did the announcement do the trick? Well, the general view still seems to be that the glass is at least half empty. It's never a good sign to announce deals before they are struck. But CEO Richard Fuld did make clear that he is open to strategic alternatives. CreditSights says this might still happen, counting Nomura, HSBC, Barclays and even Goldman Sachs as potential suitors for either the whole firm or a significant stake. Some private equity firms may also be interested. You get the feeling that any deal would be of the take-under variety. It does seem like a strategic deal of this magnitude is the only answer. Lehman may have found a way to survive, but surviving as a low-tier investment bank may be worse than death.

For more:
- here's an AP article
- here's a Seeking Alpha wrap up

Wells Fargo stays on message point

Jim Kim — Mon, 25 Aug 2008 13:21:15 -0400

One way to rebut rumors is for top executives to stay slavishly on point when they speak to the media. Wells Fargo seems to be doing just that. CEO John Stumpf repeated to the Financial Times that the big San Francisco bank, which has fared well during the credit crisis, is not interested in a transformational-type deal. "Not impossible but highly unlikely," he said. So the message to the market is to not link the bank to a big takeover of a troubled bank, like Wachovia. Wells Fargo, however, is interested in wealth management and insurance distribution companies. If there's one financial services industry that has fared well in the credit crunch, it's wealth management. Barclays also said that it was interested in such companies.

For more:
- here's the Financial Times article

Will Barclays make a move for a U.S. firm?

Jim Kim — Tue, 19 Aug 2008 21:12:14 -0400

That Barclays will buy a big U.S. bank is one of those standing rumors. They never seem to come true, but no one is quite willing to discount the idea altogether. As the credit crisis unfolded, many thought it might come to the table to rescue some banks. Bob Diamond, the bank's president, tells the Financial Times, that it might buy a wealth management firm but not an investment bank. So while it isn't going to buy Lehman Brothers outright, it might be interested in its wealth management properties. The news may give some hope to other firms, like Fifth Third and National City, which might be considering a sale of asset management divisions. It's clear that in this credit crunch, high net worth clientèles are even more important.

For more:
- here's the Financial Times article

Could anyone buy Lehman Brothers right now?

Jim Kim — Wed, 16 Jul 2008 12:25:46 -0400

The news that Lehman Brothers CEO Dick Fuld is considering a leveraged buyout highlights to some just how unattractive the firm has become to potential buyers right now. JPMorgan Chase would be a logical fit, but it is digesting Bear Stearns. Bank of America is digesting Countrywide, which will likely give it gas. Citigroup is in no position to make a major (or even minor) acquisition. The sovereign wealth funds are gun shy right now. Some have seen their investments in U.S. financial services companies tank. A MarketWatch article suggests that Deutsche Bank may be an outside candidate, along with Barclays and HSBC. Hey, the dollar is cheap right now, so why not? I doubt any bidders will emerge. So the stakes are high for Fuld. Perhaps we'll hear more about an LBO soon, though the firm can only bear so much debt.

For more:
- here's the MarketWatch article

The case for Lehman Brothers

Jim Kim — Tue, 01 Jul 2008 19:39:29 -0400

There's been a whole lot of chatter about whether Lehman Brothers is actively pursuing a white knight to bail it out. Barclays has been the focus of the most recent spate of rumors. The AP reports that Morgan Stanley analyst Patrick Pinschmidt has issued a research note that found Lehman Brothers vulnerable, but points out that "near-term concerns appear overdone." He added: "We see a forced fire sale at a distressed discount to book value as highly improbable, and thus see little reason for the firm to explore a sale at this juncture." He also concludes that the firm has adequate capital to cover additional writedowns. Pinschmidt sees the stock at $31 a share. Book value of late has been about $33 a share.

For more:
- here's the article

Related Articles:
Lehman Brothers Watch