Now that the short squeeze rally is fading with no new money flowing, in the blood on the street is Lehman’s and the bear packs are circling for the take down of another elite Wall Street firm. Until now the rating agencies would barely issue a downgrade until life support had been fully removed, but today
Moody’s Investors Service has downgraded the ratings of 279 tranches from 27 Alt-A transactions issued by Lehman XS Trust Series. One hundred sixty two downgraded tranches remain on review for possible further downgrade.
With another 97 placed on review for possible downgrade the bears have begun to stalk and falling into the trap Lehman has begun to run, announcing its intention to offer a cash raising 3,000,000 shares of preferred stock. CFO Eric Callan feigns to the leverage reducing aspects of the sale, but on the street it smells like blood as they know that Lehman won’t limp far on the 3,000,000 share band aid. The bears will pace for now — when you see a volatility spike in the company’s options you’ll know when they are going to pounce.