Lehman Bros 17/4 - " Our liquidity position has been and continues to be very strong,'' Offers US$3 Bn. Convertible stock 7.25% coupon / 33% discount

After the markets closed yesterday Richard S Fuld Jnr who is steering suddenly illiquid Lehman Brothers Holdings Inc. through the alleged "Credit Crunch", announced the sale of US$3 Bn. worth of fancy convertible preferred shares which are said to offer a 7 - 7.5 % yield , convertible into common stock at about $50, a premium of about 33 percent on the current share price .

Which is odd.

How so ?

Lehman's fortunes and shares have been on a roller coaster since last summer. When Bear Stearns disappeared in to J P Morgan 2 weekends ago the shares took a sickening lurch - they are now now down 42% compared with last summer.

On March 17, its share price opened the day down 35% on speculation that it could face a similar fate as Bear Stearns. Next day , Lehman announced its Q1 earnings ( reported net income of $489 million, down 57% EPS down 59%), and said it had $30 billion worth of cash and $64 billion in securities that could be turned into cash. The shares soared 46 percent.

In an e-mailed statement quoted by Bloomberg the bank said that day ``Our liquidity position has been and continues to be very strong,'' the New York-based company said in an e-mailed statement. ``We consider the liquidity framework under which we have operated for almost a decade to be a competitive advantage.''

The same day Moody's Investors Service affirmed the bank's credit status at A1 but lowered its outlook on the company to "stable" from "positive".

The figures also showed that Lehman wrote down US$1.8 billion, net of hedges, in the first quarter, on mortgage-related securities - although many critics saw this as too conservative. Lehman remain holding $39 billion in commercial real estate assets and $37 billion in residential mortgages.

So why do they need this cash injection ?

Referring to the sale, Lehman’s chief financial officer, Erin M. Callan, said, “We did it for several reasons — investor demand, it gave us the opportunity to deleverage faster and it provides us with dry powder to take advantage of some of the opportunities in the market.”

Elsewhere Lehman started a bizarre legal action against Japanese trading house Marubeni Corporation on Monday, claiming it had been swindled out of $352 million - said to involve forged documents and an impostor at Marubeni’s offices.

Appropriate reserves were made in Q1 figures and the bank has insurance to cover damage from the loss.

Lehman's share opened up 10% and are now trading at US$41.30 ish 50% down on 12 months ago.

Thornburg Mortgage shares leapt 33% to US$1.62 ( US$14 at beginning of March) after the hard hit residential-finance company specializing in making large mortgages to people with good credit, said it raised US$1.35 billion through selling bonds, warrants to purchase its common shares and interests in certain mortgage assets. see March 14th Carlyle leads the way with Triple A mortage Fire Sales as margin calls cannot be met


Main Capital write downs declared in last 9 months

UBS: $37.4bn
Merrill Lynch: $22bn
Citigroup: $21.1bn
HSBC: $17.2bn
Morgan Stanley: $9.4bn
Deutsche Bank: $7.1bn
Bank of America: $5.3bn
Bear Stearns: $3.2bn
JP Morgan Chase: $3.2bn
BayernLB $3.2bn
Barclays: $2.6bn
IKB: $2.6bn
Royal Bank of Scotland: $2.6bn
Credit Suisse:$2bn