Barclays seen close to deal for Lehman assets

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(Agencies)
Updated: 2008-09-17 09:39

NEW YORK -- British bank Barclays PLC intends to unveil a plan to acquire all or part of Lehman Brothers Holdings Inc.'s investment banking and trading operations, a person close to the talks said Tuesday.

People stand next to windows, above an animated sign, at the Lehman Brothers headquarters in New York September 16, 2008. Central banks pumped emergency funds into world financial markets for a second day on Tuesday in an increasingly fraught effort to contain the fallout from the crisis sweeping Wall Street's biggest firms. [Agencies]

The deal, which was expected to be announced by early Wednesday, would throw a lifeline to more than 9,000 Lehman employees whose future was uncertain after Lehman filed for bankruptcy protection on Monday. Lehman collapsed from massive exposure to risky real estate holdings.

Barclays President Robert Diamond has addressed Lehman investment bankers to inform them of his company's intentions, this person said. He spoke on condition of anonymity because a final agreement had yet to be reached.

The third-biggest bank in the U.K. had withdrawn from weekend talks with Lehman Brothers about a possible outright acquisition. There have been reports that Barclays can pick up the assets it wants for about $2 billion to $3 billion. The deal must get approval from the bankruptcy court.

Lehman's first bankruptcy hearing began late Tuesday afternoon in a crowded courtroom at the U.S. bankruptcy court in Manhattan, just steps away from Wall Street's iconic bull statue.

Shai Waisman, a lawyer for Weil, Gotshal & Manges, LLP representing Lehman Brothers, in his opening statement argued that Lehman's Brothers' downfall was the result of a "chain reaction" of events that were largely out of the investment bank's control.

"Lehman operated in an extremely unfavorable business environment," Waisman said, referring to declining asset values and low levels of liquidity.

Requests to get initial approval of potential asset sales and to obtain loans to operate while in bankruptcy from a judge were postponed by one day to a hearing scheduled for Wednesday.

Judge James Peck approved a motion Tuesday confirming that "automatic stay" applies to Lehman. Automatic stay is a typical bankruptcy rule that prevents creditors from taking actions, such as filing lawsuits, to collect debt from the company in question.

Peck also approved a motion Tuesday that JPMorgan Chase & Co. will remain Lehman's clearing house through the bankruptcy proceedings. The issue arose over the past two days, during which JPMorgan advanced Lehman $138 billion to allow it to keep trading and "avoid a disruption of the financial markets," according to court filings.

JPMorgan advanced Lehman $87 billion when the market opened Monday, acting in part on a request by the Federal Reserve Bank of New York. The New York Fed later repaid JPMorgan that amount. On Tuesday, JPMorgan advanced another $51 billion.

Also on Tuesday, the House Oversight and Government Reform committee said it would hold a hearing September 25 to examine the "regulatory mistakes and financial excesses" that led to Lehman's bankruptcy filing. It asked Lehman Chief Executive Richard Fuld to testify before the committee.