Lehman weighs spinoff of remnants: WSJ

Lehman Brothers, the failed US investment bank, is considering spinning off its remaining assets to investors who feel their value will rise in an economic upturn, US news media reported.

Internal calculations by Lehman Brothers Holdings Inc., whose assets consist of crippled real-estate and private equity holdings, have estimated their fair market value at about 45 billion dollars, The Wall Street Journal said.

That amount is more than half what it was in September when Lehman's collapse sent the global financial system into turmoil.

Lehman, according to the newspaper, puts the value of the assets at 400 billion dollars at non-distressed prices, including 300 billion dollars in assets servicing.

Some Lehman executives have named the division Lamco, or Legacy Asset Management Co., but the bank itself has yet to determine if that name will be used in a spinoff.

Despite continuing troubles in the real estate market, Lehman officials "say they want to be prepared for a rebound in asset values," the newspaper said.

According to a plan under consideration, the asset-holding company would first be legally separated from the bankruptcy estate by early 2010, after which it would sell shares to the public.

"This would be a bridge to a better time. Today's market is an aberration. We don't think it will stay like this," said Lehman chief restructuring officer Bryan Marsal, a co-CEO of advisory firm Alvarez and Marsal.

The new entity could invest in battered commercial real-estate debt, which would make the company "much more active than current bankruptcy law permits," the Journal noted.

The company could namely participate in federal programs, namely the Public-Private Partnership Investment Program, an effort to buy toxic assets off the balance sheets of troubled banks, the newspaper said, noting the plan was still preliminary and needs approval from Lehman's board, creditors and a US bankruptcy judge.

According to Lehman finance chief William Fox, Lamco has garnered about eight billion dollars in positive cash flow since Lehman's bankruptcy filing eight months ago, which amounts to most of the company's 11 billion dollars balance in cash.

The spinoff, the Journal said, would produce one of the biggest real-estate operators, with a portfolio of 20 billion dollars in equity and loan positions.

Lehman filed for bankruptcy in September as it buckled under the weight of the collapse in US sub-prime mortgages, and the resulting credit crunch. It still owes creditors about 200 billion dollars.