Sometimes you’d rather not have your cake and eat it to. 
    
Archstone-Smith looked like a win-win for Lehman Brothers: the bank, with developer Tishman Speyer, stood to own the luxury apartment REIT as well as handle financing for the $22 billion buyout — while investing just $250 million of its own cash in the deal.  
    
Now it’s looking more like it could be a lose-lose. With potential investors underwhelmed by the deal’s aggressive terms, it’s possible that billions of debt related to the buyout won’t get sold as planned. That means either the sponsors will have to adjust terms, as Apax did in its Thomson Learning acquisition, or that the banks will be stuck with it — either leaving it on their books or selling at a discount.     
    
Either way Lehman takes a hit: as a principal, renegotiating on any terms could hurt potential profits. But by also banking the deal, Lehman otherwise risks having the debt clog its balance sheet or sold at a loss.  
    
The phenomenon of banks acting as principals in deals they also underwrote is not new — Goldman, for example, is part of the group buying TXU in addition to arranging financing. If things get dicey, at least the principals won’t have to go far to negotiate with their bankers — they may be on line with them at the cafeteria.

(Photo. Reuters file)