LEHMAN BROTHER`S CASE

Summary

Industry:     

                                     Investment Service

Founder:       

·        Henry Lehman

·        Emanuel Lehman

Defunct:         2008

Headquarters: New York City

Product: -      

·        Financial Service

·        Investment Banking

·        Investment Management

Employee: 26200 (2008)

Lehman Brother holding inc. was global financial service firm before declaring bankruptcy in 2008. Lehman was the fourth largest investment bank in the US.

Lehman Brother franchise in the Asia-Pacific in the Hong-Kong and Australia as well as Lehman Brother investment banking and equities businesses in Europe and the Middle East.

At 1:45AM on September 15, 2008, the firm filed for bankruptcy protection following the massive exodus of most of its clients, drastic losses in its stock, and devaluation of its assets by credit rating agencies. Lehman bankruptcy filing is the largest in US history.

Merger with American Express (1984–1994)

Shearson/American Express, an American Express-owned securities company focused on brokerage rather than investment banking, acquired Lehman in 1984, for $360 million. On May 11, the combined firms became Shearson Lehman/America Express. In 1988, Shearson Lehman/American Express. 

Subprime mortgage crisis

In 2008, Lehman faced an unprecedented loss to the continuing subprime mortgage crisis. Lehman's loss was a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages; whether Lehman did this because it was simply unable to sell the lower-rated bonds, or made a conscious decision to hold them, is unclear.

In the second fiscal quarter, Lehman reported losses of $2.8 billion and was forced to sell off $6 billion in assets. In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten.

In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.

Investor confidence continued to erode as Lehman's stock lost roughly half its value.  The U.S. government did not announce any plans to assist with any possible financial crisis that emerged at Lehman.

Lehman announced a loss of $3.9 billion and its intent to sell off a majority stake in its investment management business.

Bankruptcy

On September 13, 2008, Timothy F. Geithner, then the president of the Federal Reserve Bank of New York, called a meeting on the future of Lehman, which included the possibility of an emergency liquidation of its assets. Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. However, both Barclays and Bank of America ultimately declined to purchase the entire company.

Bankruptcy protection citing bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion. It further announced that its subsidiaries would continue to operate as normal. A group of Wall Street firms agreed to provide capital and financial assistance for the bank's orderly liquidation and the Federal Reserve, in turn, agreed to a swap of lower-quality assets in exchange for loans and other assistance from the government.