Tuesday, April 1, 2008

Lehman raises $4 bln of capital to hush critics

Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research) raised $4 billion of capital on Tuesday by selling convertible preferred stock in a deal designed to stop questions about the Wall Street investment bank's stability.

Shares of Lehman rose over 16 percent, as the offering met with strong demand, after rumors of looming write-downs left some investors worried that Lehman could face a drain on its cash resources similar to the run on the bank that triggered the collapse of Bear Stearns Cos Inc.

Investors are jittery about investment banks, and particularly Lehman, after Bear's demise and more than $200 billion of write-downs industrywide tied to subprime mortgages and other debt.

Some investors question whether Lehman has written down enough of its $73.4 billion of mortgage and real estate assets, but Lehman has said its valuation measures are fair.

Lehman has also said it suspects short sellers have spread false rumors about the company to profit from share declines. The company said last month that it has nearly $100 billion of assets at its holding company that could be easily sold or borrowed against.