Page last updated at 21:51 GMT, Friday, 12 September 2008 22:51 UK

Lehman scrambles to find a buyer

Lehman Brothers headquarters
Lehman Brothers has lost 80% of its market value since Monday.

Executives at Lehman Brothers are racing to meet a deadline of Sunday night to find a new owner for the troubled US bank, the BBC has learned.

The BBC's business editor Robert Peston says that Bank of America is the main candidate to buy Lehman but Barclays may also play a role in the rescue.

Bankers close to Lehman warned that failure to conclude a deal by then would be devastating for firm.

Investors sent Lehman shares tumbling again in New York trading.

"If a solution isn't found by the time Asia opens for business on Monday, well the consequences would be disastrous," a senior banker told the BBC.

Our correspondent says that the US Treasury is working assiduously behind the scenes to facilitate a takeover of the bank.

He says that Barclays is taking part in the negotiations to buy all or part of Lehman but a US solution, led by Bank of America, is still the most likely outcome.

Lehman's fund management business, which is in relatively good shape, may be sold separately, he adds.

Losses mount

Lehman announced the biggest loss in its history on Wednesday and investors remain unconvinced by the bank's plans to strengthen its finances.

Lehman shares fell 13.5% to close at $3.65 in New York after falling around 40% on Thursday.

Lehman will be lucky to end the day as an independent bank
Robert Peston, BBC business editor

The company has lost 80% of its market value since Monday. Six months ago the stock was trading at $48.65.

The Financial Times reported that Bank of America is considering a joint bid for Lehman with with private equity firm JC Flowers and China Investment Co, the Chinese sovereign wealth fund.

Concerns over the fate of Lehman follow the bail-out on Sunday of mortgage giants Freddie Mac and Fannie Mae. The lenders were thrown into financial difficulty after the collapse of the US sub-prime mortgage market.

Our correspondent says that Wall Street has lost confidence in Lehman's capacity to survive as an independent entity.

Graph

But he questions whether any company would take the plunge and take over Lehman without some government support.

"The US Treasury may... have to provide some backstop underwriting for Lehman, so that an orderly resolution of Lehman's woes can be achieved," our correspondent says.

"When confidence in a bank erodes, it ebbs at first and then is gone in a great whoosh. Lehman will be lucky to end the day as independent bank."

White House spokesman Tony Fratto said the US Treasury "is closely monitoring the markets and they stay in contact with market participants".


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