DealZone

Deals wrap: AgBank’s IPO causes frenzy

It’s hard to find fault with the second-largest IPO in history, but analysts were only lukewarm about this week’s $19.3 billion IPO debut by Agricultural Bank of China.

Despite the tepid debut, AgBank’s IPO is only overshadowed by Industrial and Commercial Bank of China’s (ICBC) world record $21.9 billion public float in 2006. More interesting than the monetary value attached to its IPO was the fact that AgBank was even able to pull it off in the first place, given the global downturn and a very short three-month completion process. In a Reuters special report, one banker involved in the deal said: “It’s the last of its kind.”

Apparently cats aren’t the only species with nine lives – hedge-fund advisers do too. Bloomberg reported that Neuberger Berman Group LLC, which was part of Lehman Brothers Holdings Inc., has “reassembled a team of executives to invest as much as $1 billion in firms that run hedge funds.”

With this week’s announcement that Kleiner Perkins Caufield & Byers partner Joe Lacob led the group that was buying the NBA’s Golden State Warriors for a record $450 million, PE Hub editor Dan Primack wondered whether Lacob would quit his day job as one of Silicon Valley’s most prominent venture capitalists.

Graphic: How “Repo 105″ worked

A look at “Repo 105,” a series of transactions that Lehman Brothers is alleged to have used to make its balance sheet appear stronger.

- Text: Dan Wilchins, llustration: Silvio DaSilva

Should banks or regulators come up with “living wills”?

USBROKERS/RESEARCH-CITIGROUP The idea that financial firms whose collapse could create trigger broad economic problems should come up with their own living wills has been gaining traction lately.

After the confused attempt to bailout or save Lehman Brothers, Bear Stearns and AIG in 2008, some regulators have been suggesting that banks and important financial institutions plan for their own demise.

A senior Canadian finance official said on Wednesday that the Group of Twenty (G20) are thinking about the idea as a way to avoid financial meltdowns.

Lehman and its aftermath, by the numbers

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With apologies to Harper’s Index, some collected statistics on the collapse of Lehman and the roller-coaster year that followed.

Add your own significant digits in the comments section.

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Number of siblings who made up the original Lehman Brothers, founded as a dry-goods store in 1844: 3

Age of Bavarian immigrant Henry Lehman when he founded the business: 23

Percentage difference between the DNA of former Lehman CEO Dick “The Gorilla” Fuld and an actual gorilla:

Real estate players are tangled up in Lehman

Before it declared bankruptcy, Lehman was one of the biggest investors of debt and equity in U.S. commercial real estate estate. But having Lehman as a partner these days is a little like climbing a staircase in an M.C. Escher drawing — you’re bound to end up where you started.
Take ProLogis for example. The world’s largest owner and developer of warehouse and distribution centers set up a property fund in which Lehman in an equity investor as well as the lender.
Before Lehman Brothers Holdings Inc filed for Chapter 11 bankruptcy in September, the two planned to pay off the $166 million loan on the portfolio.
“Subsequent to them going into bankruptcy they were impossible to get hold of. We finally did, and they said they were still in the game for paying this off.”
Lehman said it just needed to get the correct approvals.
“About a week later, we got a call from State Street Bank bank who said, ‘We are the lender on the Lehman portfolio. We now own the loan,’ Chief Financial Officer William Sullivan told investors in New York.
The subsequent chat went well, but there was one problem.
“The fact of the matter is is that we don’t know that they own the loan today,” Sullivan said. “They had told us they own the loan. They have not provided us with documentation that they own the loan, and Lehman thinks they own the loan but are not sure.”
The three are trying to work out an extension while they straighten out the loan’s ownership. Meanwhile, the loan was due Nov. 11.
“We think we’ll wrap this up in the next week,” Sullivan said. “But from our prospective, this loan should be considered extended at this point. If that doesn’t turn out to be the case, in the grand scheme of things, it goes into default, and I’m certain that Lehman and State street will have a merry old time discussing it.”
There likely will be a lot of talk. Mark Edelstein, partner in the firm of Morrison Foerster told a room full of lawyers that extensive negotiations on Lehman deals are par for the course these days. Sounds like a lot billable hours.

Sales and subpoenas for Lehman

fuld3.jpgAn auction of Lehman‘s Neuberger Berman unit and other investment management bits and pieces moved closer yesterday with bid procedures getting clearance from a New York judge.
 
Private equity groups Bain Capital and Hellman & Friedman agreed last month to purchase Lehman’s prized asset management unit for $2.15 billion, and they will be the lead bidders at an auction for the unit in December.
 
In a status update prior to the judge’s ruling, Lehman’s lead attorney, Harvey Miller, said prosecutors had opened three grand jury investigations into the investment bank’s demise. The New York Post reported that disgraced CEO Dick Fuld is among 12 Lehman executives being subpoenaed. Fuld, questioned by a U.S. congressional panel earlier this month, denied deceiving shareholders.
 
Politicians and the public are calling for heads to roll on Wall Street. Looking into Lehman are federal prosecutors as well as at least one state attorney general. And the FBI is in the early stages of examining mortgage finance companies Fannie Mae and Freddie Mac and insurer American International Group, which were bailed out by the government after getting caught in the credit crunch.
 
Did anyone actually understand the rocket science behind the engineering of the credit default swaps and other complex financial tools that blew up behind the scenes? If not, then it might be a hard sell to convince anyone that investors were intentionally misled.

In the brave new financial world that emerges from the chaos of the ’08 crash, will Wall Street executives be expected to understand everything their firms are doing? Sounds reasonable, if unlikely.

Deals of the day:

* The credit crisis has forced Dutch builder Royal BAM Groep to put on hold its plan to sell its 21.5 percent stake in Dutch dredger Van Oord, BAM said.

Sympathy for the devil’s banker

After a couple weeks of just trying to keep up with developments in the financial crisis, reporters and bloggers are taking halting steps toward describing the mythos of the investment banker.

It’s been a while since Tom Wolfe and Bret Easton Ellis popularized the bespoke-suited arrogance commonly associated with the financial world’s anointed — the easy millions, the casual disdain for the rubes and the marks in the lower classes and the single-minded pursuit of money. Depicting the carnivore in his or her habitat is beginning to come back into vogue as taxpayers who may soon be on the hook to bail out their social betters in the investment banking world wonder why they’re getting stuck with a bill they didn’t incur.

New York magazine ran a story called, “The Rage of the Previously Rich: A Lehman trader copes with the sudden onset of income shrinkage,” featuring this choice nugget:

Before the Bell: Buffett’s ball

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There’s nothing like a belle to bring a festive mood to an otherwise gloomy ball, and today that honor belongs to Goldman Sachs, which has drawn attention – and money – from none other than Warren Buffett.

Stock futures are pointing up on news of the uber-investor’s plan to purchase a $5 billion stake in the bank. And Japanese media say that Sumitomo Mitsui Financial Group is also looking to buy in.

But the fate of the Wall Street bailout plan remains the $700 billion question. Congress is continuing discussions today, with Fed chief Ben Bernanke testifying before the House Financial Services Committee.

Some Lehman employees bag their belongings

lehmanbox22.jpgStaffers at the once No. 4 U.S. investment bank headed into its midtown Manhattan headquarters on Monday morning, armed with bags and suitcases of all sizes.

Their emotions ran the gamut.

One man caught his co-worker’s eye and threw his hands up in the air in dismay before hurrying into Lehman’s global headquarters, a few minutes’ walk from Times Square.

“It is madness,” one man said on the phone, as he walked by dozens of reporters lined up on the sidewalk in front of the building. 

Who’s next and how?

A worker carries a box out of the U.S. investment bank Lehman Brothers in LondonLehman‘s most valuable assets, primarily Neuberger Berman, are still on the block, but becoming less valuable by the hour with the bank having filed for bankruptcy protection. And with Merrill Lynch now heading for the relative safety of Bank of America‘s $50 billion embrace, it’s time ask “Who is next and how?” Most attention is squarely focused on insurer AIG and investment bank Morgan Stanley.

AIG’s shares lost a third of their value in pre-market Monday action. Warren Buffett would be a natural candidate for AIG assets, given it’s a business he knows (and part of being a successful oracle is knowing your businesses).

On Sunday AIG is reported by the New York Times to have approached the Fed seeking $40 billion in short-term financing. An investor call is expected later today.
The Fed might be more willing to play a role in getting AIG sorted out as well, if it sensed a systemic risk to another strut of the financial markets.