Dick Fuld

Korean military pension to invest in Lehman Brothers?

Jim Kim — Wed, 03 Sep 2008 17:28:16 -0400

Lehman Brothers has got some kind of Korean connection at work. We've noted that the Korea Development Bank's Min Euoo-sung was CEO of Lehman Brothers' South Korean operations until taking the helm of KDB earlier this year. He seems to favor the consortium approach, which may have encouraged the South Korean Military Mutual Aid Association, a military pension fund, to get involved. It says it would consider a joint investment. In the past, it was seen as a fund that voiced misgivings about foreign companies buying Korean companies, reports the Financial Times. But transactions in the other direction are a different matter. Fuld seems to have cast a wide net in Asia. But a deal doesn't really seem imminent. The clock is ticking. If the bank cannot announce a capital event along with its big writedown this month, it will not go over well.

For more:
- here's the Financial Times article

What does George Soros see in Lehman Brothers?

Jim Kim — Wed, 20 Aug 2008 13:49:18 -0400

Last year was a sweet comeback year for George Soros. His fund was on fire. And he seemed to really understand the credit markets and the effect the temblors would have on Wall Street firms. This made his recently accumulated 10 million share stake in Lehman Brothers all the more puzzling. So what does he see? Well, as the Motley Fool notes, this could be a short term bet. The battered shares, at less than half of book value, may be due for a dead-cat like bounce (we may have seen it already, in fact). Or he may be betting that embattled CEO Dick Fuld can manage his way out this mess. Then again, he may discern something that we mortals can't. Of course, he's not guaranteed a win with this bet. Value buying hasn't been a winning strategy when it comes to financials.

For more:
- here's the article

Are Lehman Brothers' options dwindling?

Jim Kim — Thu, 24 Jul 2008 07:42:54 -0400

Will Lehman Brothers be forced to sell its Neuberger Berman asset management unit? There's been a lot of talk that it might be forced to find a buyer, or sell shares to the public. A UBS analyst just told clients that the bank will likely take that step in concert with a sale of risky assets, basically about $30 billion worth of mortgage-related stuff, reports the New York Post. I'm sure the bank has considered these options. My guess would be that the valuations just aren't there. But Lehman, like other banks, may not have a lot of choice. It could take its dividend from 17 cents to zero and not raise much. Foreign investors do not seem to be biting. A leveraged buyout looks iffy, so short of selling the entire company, what else can it do but sell assets? Of course, in a best-case scenario, the capital it has already raised--$12 billion--will be enough. Of note, its stock is now back above book value.

For more:
- here's the article

Is Wall Street credibility an issue?

Jim Kim — Mon, 21 Jul 2008 13:28:33 -0400

Breakingviews notes that a lot of CEOs should "now help themselves to generous portions of the sanguine words they have uttered over the last few months." Lehman Brothers' Dick Fuld, JPMorgan Chase's Jamie Dimon, Goldman Sachs' Lloyd Blankfein and Morgan Stanley's John Mack all publicly suggested that the worst was over. But that hasn't turned out to be the case. Perhaps the optimistic words were justified at the moment, but as of now, such pronouncements have been proved premature. Here's another example. In late 2007, Bank of America CEO Ken Lewis uttered a memorable phrase: "I've had all the fun I can stand in investment banking." He wanted to scale back dramatically. As of late, however, the bank has been staffing up, as investment banking revenues have soared to near-record levels. Circumstances can change, people understand that. They've also learned to appropriately discount CEO pronouncements. Trust, but verify.

For more:
- here's the Breakingviews article

Related Article:
Can Wall Street firms be believed?

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

Tough situation getting worse for Lehman Brothers

Jim Kim — Tue, 15 Jul 2008 13:34:49 -0400

The conventional wisdom is that Lehman Brothers will not implode the way Bear Stearns did, thanks mainly to its access to the Fed credit facility. But as one Lehman short seller puts it via Seeking Alpha, "the expectations seem to anticipate that there will be an orderly, gradual unwinding of Lehman Brothers supported by the Fed promise [or actual supply] of liquidity, where shareholders likely get wiped out [or close to it], and senior lenders are likely to recover most of their money." Not a pretty picture. Given that there doesn't appear to be any real buyers out there, and that capital raising will be hard, some are suggesting that a management-led buyout may be the answer. The New York Post reports that CEO Dick Fuld is getting serious about such a move. The firm may be cheap enough, but it certainly cannot handle a whole lot more debt. There are also rumors that Lehman may sell money manager Neuberger Berman, which makes a lot of sense.

For more:
- here's the item on Seeking Alpha
- here's the New York Post item
- here's a CNBC article
- here's a bullish case for Lehman. Item

The art of the rumor

Jim Kim — Wed, 09 Jul 2008 07:43:26 -0400

Rumors can be a nasty business on Wall Street. Increasingly, they're a high stakes business. There's already been one prosecution. The SEC recently announced a settlement with Paul Berliner, a trader formerly associated with the Schottenfeld Group; he was alleged to have spread rumors that the Blackstone Group was on the verge of renegotiating a deal for Alliance Data. The SEC is also looking into the role that rumors played in the Bear Stearns debacle. None of this has deterred the practice, however. It's a favorite pastime on Wall Street, one that has most recently befuddled Lehman Brothers. The New York Times quotes CEO Dick Fuld, as saying, "I will hurt the shorts, and that is my goal." Technology has made rumor-mongering that much more efficient. But people should not think that IMing and texting will render your words untraceable. The day when a case is built on new-age communication forms is not far off (see next item).

For more:
- here's a New York Times column

Can Wall Street firms be believed?

Jim Kim — Fri, 27 Jun 2008 12:25:03 -0400

Forbes magazine notes that there's a lot of flip-flopping occurring on Wall Street right now. The magazine points out that there are many instances of this. For example, after raising $6 billion in January, Merrill Lynch said it was done; then in April, it raised another $9.6 billion. Lehman Brothers also said its capital levels were fine; soon afterward, it raised another $6 billion. CEO Dick Fuld still is sticking to his worst-is-over line. Not too long before Bear Stearns tanked, CEO Alan Schwartz said on TV that his firm was not experiencing a liquidity run. Now, all this may reflect really fast-moving events and markets. But at this point, every time a company says it's looking good, you have to be suspect, whether fair or not.

For more:
- here's the article

Is Bank of America's Ken Lewis the next to get sacked?

Jim Kim — Wed, 25 Jun 2008 13:17:22 -0400

In the recent furor over Lehman Brothers, many have suggested that CEO Dick Fuld's job is on the line. You really could say the same for other banks out there--big and small--as well. A commentary on Seeking Alpha weighs in with some thoughts on Bank of America CEO Ken Lewis. It's fair to say the jury is deliberating. On one hand, he has shrewdly built the company on acquisitions; Fleet Boston and MBNA come to mind. But will the Countrywide deal be his undoing? We've said before that he has bet his career on this deal. It has to work out for him. Seeking Alpha suggests that if the deal goes through, his career will be in jeopardy because the bank will undoubtedly struggle. The positive spin is that it's an opportunity to prove his worth all over again as a CEO.

For more:
- here's the item

What to make of Dick Fuld's pay?

Jim Kim — Mon, 23 Jun 2008 21:26:56 -0400

People often point out that compensation boards want top executives to rake in the bucks as long as shareholders do. But what about when the stock tanks? Should they be required to give back some of the stock gains they've pocketed? I really pose this as a rhetorical question, but it is striking to note, as a Fortune columnist does, that Dick Fuld, CEO of Lehman Brothers, has made $489.7 million (before taxes) from selling 14.4 million optioned and restricted shares over the years. For most of that time, investors were profiting as well. Last year, when Lehman stock dropped 16 percent, he still cashed in to the tune of $53 million. So what to make of it? Well, he was given the options and restricted shares legally. He had a right to cash out, but it looks bad. It's definitely a PR issue. The fact that Fuld will not receive his bonus is of little help. What would really help on that front now would be for the top execs to announce a massive purchase of Lehman stock with their own money. That would send the right message.

For more:
- here's the column