Lehman to Spin Off $4.5B Private Equity Arm

A strategy of hold and manage, rather than sell into weakness, has emerged

By Clay Dillow, Newser Staff

Posted Jan 9, 2009 8:29 AM CST

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Lehman to Spin Off $4.5B Private Equity Arm — The once mighty Lehman Brothers' headquarters is still manned by around 150 or so advisers, who will likely spend a few years unwinding the company's financials and selling off its assets. (AP Photo/Mary Altaffer, file)

Lehman Brothers, bleeding out but not quite dead, will spin out its private equity arm into an independent firm, which will take on new investment from a South African billionaire investor, the Wall Street Journal reports. The Lehman estate will retain a small interest in Lehman Brothers Merchant Banking, which manages $4.5 billion and holds stakes in a dozen companies.

The move reflects the decision by Lehman’s restructuring advisers to hold assets rather than sell them into a recessionary marketplace; several private equity firms, including Blackstone and Carlyle, had expressed interest in acquiring the unit. Lehman’s bankruptcy estate will spin out the unit’s most recent fund, a $3.3 billion vehicle created in 2007, to the funds’ managers while retaining a $1.2 billion vehicle holding existing investments.
(More financial crisis stories.)

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