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September 15th, 2008

Lehman Files for Ch. 11, BOA Buys Merrill Lynch

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As deals from Barclays and Bank of America fell through to purchase Lehman Brothers over the weekend, the 158-year old company was forced to file for Chapter 11 bankruptcy protection early this morning:

Lehman said none of the broker-dealer subsidiaries or other subsidiaries of LBHI will be included in the Chapter 11 filing and all of the broker-dealers will continue to operate. Customers of Lehman Brothers, including customers of its wholly owned subsidiary, Neuberger Berman Holdings LLC, may continue to trade or take other actions with respect to their accounts, Lehman said.

Click here to read the press release from Lehman Brothers announcing their intent to file for Chapter 11.

In separate but all too related news, Bank of America struck a deal to make an all-stock purchase of Merrill Lynch:

Bank of America said it agreed to buy Merrill Lynch in an all-stock deal worth $50 billion, snagging the world’s largest retail brokerage after one of the worst-ever weekends on Wall Street.

Bank of America said it expects to achieve $7 billion in pretax expense savings, fully realized by 2012, and expects the deal to be accretive to earnings by 2010. The transaction is expected to close in the first quarter of next year.

The price, which comes to about $29 per share, represents a 70 percent premium to Merrill’s share price on Friday, although Merrill’s shares were trading at $50 in May and over $90 at the beginning of January 2007. The deal has been approved by directors of both companies. Three Merrill directors will join the Bank of America board.

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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