LEH will still have at least $7B in equity even after severe stree writedowns!
An analysis of Lehman's distressed mortgage assets shows that a sale may be possible without U.S. backing. In a worst- case scenario -- with the assets discounted more deeply than in recent distressed sales -- a buyer could write off almost half of Lehman's $50 billion in mortgage holdings and still have $7 billion of equity left in company, based on figures the investment bank disclosed when it reported third-quarter financial results this week.
``The firm should be worth something even after the troubled assets are taken out at a massive discount because Lehman has a good franchise,'' said Corne Biemans, a Boston- based senior portfolio manager at Fortis Investments, which oversees about $200 billion. ``There are distressed asset buyers who should be interested in this stuff at such serious haircuts.''
Lehman had $50 billion of mortgage-related assets at the end of August, marked down to between 29 cents and 85 cents on the dollar. Reducing valuations further to between 5 cents on the dollar for collateralized debt obligations and 35 cents for European mortgages would result in $21 billion of further writedowns. The shareholders' equity was $28 billion at the end of firm's fiscal quarter in August.