Recent events have shed some light on why Black Rock suddenly doubled its position in Lehman Brothers. Needless to say, many people find it strange that Black Rock would load up on a bank that has a toxic balance sheet and has lost 75 percent of its stock price over the last year… especially at the start of a major credit crisis. Let’s see what the press is saying:
Lehman Brothers Holdings Inc., seeking to restore investor confidence after a $2.8 billion second-quarter loss, is negotiating to sell commercial real estate assets to a group including BlackRock Inc., said three people briefed on the discussions.
“They are taking steps to eliminate parts of the balance sheet that have caused concern,”Bove said in an interview yesterday. He rates the stock “neutral” and expects the bank to sell assets for 10 percent less than their valuation.
Before we go any further, let me just say one thing: DO NOT BELIEVE THIS GUY! Ok, now that we’ve got that out of the way, let’s move on because it looks like we are about to go to the reception following a shotgun wedding.
Either this is an arrangement orchestrated by some of Diamond’s friends in lowly places, or else it’s just a good ole smoke screen ala Merrill Lynch. Remember how Merrill pretended to dump a pile of damaged assets once and for all, but when the smoke cleared, we realized we had been hoodwinked with a fancy magic trick? Take a look:
What this transaction actually accomplishes is getting the paper — but not the full liability — off of Merrill’s books.
How very Enron-like !
Yea, well Enron didn’t write the book; they just stole a page. We will not believe Lehman is on the up and up until we see how much of this deal is self-financed and until we know what the terms are.
Merrill Lynch will provide financing to the purchaser for approximately 75% of the purchase price. The recourse on this loan will be limited to the assets of the purchaser. The purchaser will not own any assets other than those sold pursuant to this transaction. The transaction is expected to close within 60 days.”
Even then we will be suspicious. This magic book has way too many pages.