Lehman Brothers Holdings Inc. Chief Executive Officer Richard Fuld is seeking buyers for the investment bank amid signs that the US government may balk at providing the funding that enabled Bear Stearns Cos. to sell itself and avoid bankruptcy. Fuld, who built Lehman into the biggest US underwriter of mortgage securities during his four decades at the firm, was pushed toward a forced sale after talks about a cash infusion from Korea Development Bank ended, sparking a 70 percent drop in the firm's market value during the past three days. Unlike when JPMorgan Chase & Co. took over Bear Stearns, the Federal Reserve and Treasury aren't likely to put up money for a purchase of Lehman, people briefed on the matter said on Thursday. “Lehman's sale is likely to take a different form because there was serious political fallout from the JPMorgan-Bear deal,'' said Sean Egan, president of Egan-Jones Ratings Co. in Haverford, Pennsylvania. “It could be a consortium that buys Lehman, with the Fed's help.'' Bankers from other firms were reviewing Lehman's books yesterday, according to people with knowledge of the situation, and a deal may be announced before Asian markets open Sept. 15, one of the people said. The New York-based investment bank announced the biggest loss in its 158-year history on Sept. 10, as devalued real estate assets led to $5.6 billion of writedowns in the third quarter. Lehman rose 17 percent in German trading on speculation Fuld is close to finding a buyer for the bank. The shares advanced to $4.94 as of 12:40 P.M. in Frankfurt from their $4.22 close in New York on Thursday. Bank of America Corp. is the most likely buyer for Lehman, Ladenburg Thalmann & Co. analyst Richard Bove said in a note to clients today. The Charlotte, North Carolina-based bank would gain “one of the best'' fixed income desks in the US and boost its research and capital markets businesses, Bove said. Bank of America may team up with Barclays Plc and private equity firms to make an offer for Lehman, analysts at MF Global Securities Ltd. said. Barclays would acquire Lehman's asset management unit to gain actively managed mutual funds and hedge funds, Mamoun Tazi, a London-based analyst at MF Global, said in a telephone interview today. “The shares are up because people sense there's a deal to be done,'' said Rupert Della-Porta, the London-based chief operating officer of research firm Atlantic Equities. “We're entering the end-game.'' Without a “strategic arrangement'' in the “near term,'' Lehman's credit ratings may be downgraded, Moody's Investors Service said after Lehman reported the results. A downgrade could ratchet up Lehman's borrowing costs and deter others from trading with the firm. Spokesmen for the Charlotte, North Carolina-based lender, Lehman and the Fed declined to comment. Treasury is “in regular contact'' with market participants, spokeswoman Jennifer Zuccarelli said. When Bear Stearns collapsed in March after customers and lenders deserted the firm on concern it was running out of cash, the Fed agreed to take on $29 billion of hard-to-sell assets from the company to induce JPMorgan Chase & Co. to buy it. At the same time, the central bank opened a lending facility for brokerages, including Lehman. The decisions prompted warnings from current and former regulators, who said that the Fed was creating a so-called moral hazard by encouraging firms to take on excessive risk in anticipation of government aid in the event their bets fail.
