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Lehman Brothers reeling from historic losses

Latest update : 2008-06-13

Wall Street's Lehman Bros. fell to the subprime curse, racking up an unprecedented $2.8 billion loss in the second quarter of the fiscal year. It has replaced its CFO and COO, and is attempting to raise money through special share offerings.

US investment bank Lehman Brothers said Thursday that it had successfully closed two special share offerings aimed at raising six billion dollars to help shore up its troubled finances.

Lehman had announced the share offering drives on Monday, when it also told investors that it would likely post an unprecedented second-quarter loss of 2.8 billion dollars due to trading losses amid a lingering credit squeeze.

The storied bank's earnings have taken a hit from losses tied to mortgage-backed securities and because of a wider business slowdown triggered by the US housing downturn and the credit squeeze.

Lehman said it had closed a four billion dollar offering of 143 million shares at 28 dollars a share and a further special offering which raised two billion dollars related to convertible stock.

The bank initiated the offerings to raise capital to help offset its trading losses.

Lehman's stock has tumbled in recent months. It closed down 4.4 percent at 22.70 dollars.

The finance house, which is due to formally release its quarterly results on Monday, had announced a management shake-up earlier Thursday.

The overhaul will see Ian Lowitt succeed Erin Callan as Lehman's chief financial officer. Lowitt has held a series of executive roles at Lehman since 1994.

The bank also said that Herbert McDade would replace Joseph Gregory as the firm's president and chief operating officer, also with immediate effect.

Lehman, like many of its Wall Street rivals, has seen its finances roiled by housing and credit woes which have made bankers more cautious about lending money to big corporate clients.

A rival finance house, Bear Stearns, came close to imploding in mid-March following vast losses tied to mortgage-backed securities before the Federal Reserve backed an eleventh hour takeover by JPMorgan Chase.

Lehman officials have said the bank has ample liquidity to ride out the credit storm.
  

Date created : 2008-06-13