Report: Lehman shops $10bn alternatives arm to buyout groups

Carlyle, General Atlantic, Hellman & Friedman and Blackstone have been reported as potential buyers of Lehman Brothers divisions including its private equity arm, as the beleaguered investment bank looks to shore up its balance sheet.

Lehman Brothers has reportedly approached a handful of private equity firms about the sale of its well-performing investment management group, which includes private equity and hedge funds, wealth management and its Neuberger Berman asset management divisions.

The Carlyle Group, Hellman & Friedman and General Atlantic have been given a first look at a possible deal, while publicly traded peer The Blackstone Group has also expressed interest in terms of expanding its franchise, people familiar with the matter told The Wall Street Journal.

Lehman is looking to strengthen its balance sheet by selling all or part of these assets, together valued at as much as $10 billion (€6.8 billion), The Journal said.

The move would follow in the footsteps of Merrill Lynch and Citi, fellow US investment banks struggling to cope with mortgage-related losses and write-downs. In mid-July, Merrill sold its stake in Bloomberg for about $4.5 billion, while Citi sold a German commercial finance unit for roughly $7.7 billion.

In late July, Merrill also sold about $31 billion in collateralised debt obligations to US private equity firm Lone Star Funds at a sharp discount. Lone Star agreed to pay $6.7 billion while the investment bank agreed to finance 75 percent of the purchase price.

Rumours have permeated Wall Street and the financial press for weeks about potential asset sales by Lehman, including sale of its mortgage-related securities to former Blackstone affiliate BlackRock.

Analysts are predicting Lehman will post a $1.8 billion third quarter loss, which follows a $2.8 billion second quarter loss.

“Lehman's caught between a rock and a hard place. They're getting more and more pressure from regulators and investors to add reserves or mark these things down,” David Hendler, an analyst at CreditSights, an independent research firm in New York, told Reuters last week. “In normal times, they could wait it out, but the market wants it done now.”