Lehman Brothers Files for Bankruptcy After Bid Talks End

Tom Burroughes

15 September 2008

Lehman Brothers, which was once the fourth-largest US investment bank, said it will file for bankruptcy after UK bank Barclays and US–based Bank of America abandoned talks to buy the besieged business.

Lehman, one of the biggest underwriters of mortgage-backed securities that have been hammered by the collapse in the US housing market, said in a statement that it plans to file a Chapter 11 petition in the US Bankruptcy Court for the Southern District of New York. The filing will be by the holding company and will not include any of its subsidiaries, Lehman said.

Lehman, led by chief executive Richard Fuld, is exploring the sale of its broker-dealer operation and continues to hold talks on the sale of its asset-management unit, the company said.

Barclays, which had emerged as a leading candidate to acquire Lehman in media reports over the weekend, pulled out first yesterday. It said it could not obtain guarantees from the government or other financial institutions to protect against potential losses on Lehman's assets. Bank of America also pulled out of any bid.

The US Treasury and the Federal Reserve held talks with Wall Street executives for the past three days in New York to try to reach an agreement that would prevent the investment bank from failing before markets open today.