Sunday, March 16, 2008

Lehman to follow Bear Stearns example?

Lehman announced a $2 billion line of credit closing Friday, and a 100 million share buyback a few weeks back financed with a preferred. What company would leverage themselves up in this environment?

Lehman guaranteed $7.5 billion of Variable Interest Entities (VIE) of which they said, "We believe our actual risk to be limited because our obligations are collateralized by the VIE's assets and contain significant constraints...."

CreditSights said Citicorp's VIE could worth .27 cents on the dollar. Most people believe CreditSights likes to get headlines. But what is Lehman's worth? Is anyone buying their story? The market isn't. And that's the only price that counts.

Thursday, the CEO of Bear went on national television saying they have plenty of liquidity. Now we know what he means by liquidity. It's $2 a share.

We'll soon see Lehman's version of liquidity.

And it probably won't be pretty either.

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