Lehman Brothers Liquidation Likely

There is a special CNBC program on Lehman tonight, 8-10 PM New York Time.

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Holy Shit! Latest

Update:

Merrill Board voting on $29 per share all stock deal, according to WSJ;

NYTimes says says Lehman Bankruptcy filing imminent;

U.S. Stock Futures Tumble on Lehman Bankruptcy (Bloomberg)

Greenspan: Other big U.S. finance firms may fail (Reuters) 

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WSJ now says that For Lehman, Liquidation Seems the Most Likely Scenario (WSJ.com)

First, we have the two major buyers unable to come up with a deal:

• Barclays Walks from Lehman Deal; Likelihood for Transaction Narrows  (WSJ)

• Bank of America Said to Walk Away From Talks to Buy Lehman  (Bloomberg)

• See also Hurricane Fuld Lashes NYC.

And in a surprising twist, BofA not only walked away from Lehman, they walked into the arms of Merrill Lynch: Bank of America, Merrill Lynch In Merger Talks. NYT Dealbook reports a possible $38 Billion deal, at $25-30 (Friday close $17.05).

BofA scorecard: First, they horrifically overpaid for Countrywide. Now they want Merrill. (Some people never learn).  If they just wait a day, they could probably pick up Merrill for significantly less money, based on Lehman’s likely loss. Its an all stock deal, but MER stock may fall more than BofA’s.

On an unrelated note, AIG is planning a Major Restructuring, Sale of Aircraft-Leasing Business.

We are now on bankruptcy watch, with the midnight hour as the key line in the sand. The Wall Street open Monday in the event of a Lehman failure will be wild:

Wall Street Prepares for Potential Lehman Bankruptcy
(Bloomberg)

"The fate of Lehman Brothers Holdings Inc.’s darkened early Sunday
afternoon with Barclays PLC, the sole remaining bidder for the
158-year-old Wall Street firm, telling federal regulators that it is
walking away from a transaction, people familiar with the matter say.

The situation was rapidly evolving, and it’s possible Barclays or
another bidder would emerge to save Lehman before markets opened
Monday. But with the government balking at putting any taxpayer money
at risk for Lehman, the likelihood of a transaction was dimming. That
would leave an orderly liquidation as the most likely scenario, a dramatic outcome for a once-powerful firm."

And then there’s this Likelihood for Transaction Narrows  (WSJ)

The fate of Lehman Brothers Holdings Inc.’s darkened early Sunday afternoon after Barclays PLC, the sole remaining bidder for the 158-year-old Wall Street firm, told federal regulators that it is walking away from a transaction, people familiar with the matter say.

With Barclays ending talks and the government balking at putting any taxpayer money at risk for Lehman, the likelihood of a transaction was dimming. That would leave an orderly liquidation as the most likely scenario, a dramatic outcome for a once-powerful firm.

Lastly, we have the swaps and derivatives producing this statement on Lehman, holding a special Sunday session in anticipation of a Lehman bankruptcy filing: 

"ISDA confirms a netting trading session will take place between 2 pm and 4 pm New York time for OTC derivatives. Product classes involved are credit, equity, rates, FX and commodity derivatives. The purpose of this session is to reduce risk associated with a potential Lehman Brothers Holding Inc. bankruptcy filing. Trades are contingent on a bankruptcy filing at or before 11:59 pm New York time, Sunday, September 14, 2008. If there is no filing, the trades cease to exist. These trades are subject to a protocol which is being distributed by ISDA (International Swaps and Derivatives Association). Traders should execute the protocol and return to ISDA.”   (Full statement here)

Tomorrow is going to be very, very interesting day . . .