by Calculated Risk on 9/14/2008 09:00:00 PM

From the WSJ: Bank of America Reaches Deal for Merrill

Merrill Lynch & Co. agreed late Sunday to sell itself to Bank of America Corp. for roughly $44 billion ... or roughly $29 a share...

by Calculated Risk on 9/14/2008 06:27:00 PM

Update: An overview of the wild day from Andrew Sorkin at the NY Times: In Frantic Day, Wall Street Banks Teeter

From the NY Times: Lehman to File for Bankruptcy Protection

Lehman Brothers will file for bankruptcy protection on Sunday night ... Lehman will seek to place its parent company, Lehman Brothers Holdings, into bankruptcy protection, while its subsidiaries will remain solvent while the firm liquidates its holdings ...

Dow Futures from CBOT.

CBOT mini-sized Dow (more liquid than big Dow above).

Barchart.com indices futures. (make sure you look at the ones with times - not dates - in the time column)

Bloomberg Futures.

by Calculated Risk on 9/14/2008 05:00:00 PM

I was hearing BofA wasn't interested in Lehman because Merrill was a better fit. I guess those rumors were true.

From the WSJ: Bank of America, Merrill Lynch In Merger Talks

From the NY Times: Bank of America in Talks to Buy Merrill Lynch

Bank of America is in advanced talks to buy Merrill Lynch for at least $38.25 billion in stock ... valued at between $25 a share to $30 a share, could be announced as soon as Sunday night

From Bloomberg: Bank of America Said to Walk Away From Lehman Talks

It sounds like the Lehman bankruptcy filing is expected before midnight ET tonight.

Update: And A.I.G. plans to announce a major restructuring, from the NY Times: A.I.G. to Plan Restructuring and Asset Sales

Several private equity firms were at A.I.G.’s headquarters in downtown Manhattan on Sunday, and may inject billions of dollars in capital into the firm ... Among the businesses likely to be sold is A.I.G.’s aircraft leasing business

This restructuring will apparently be announced early Monday morning.

by Calculated Risk on 9/14/2008 03:01:00 PM

From Bloomberg: Wall Street Prepares for Potential Lehman Bankruptcy Filing

Financial firms have started ``netting'' Lehman trades on credit, equity, interest-rate, foreign exchange, and commodity derivatives, according to a statement from the International Swaps and Derivatives Association e-mailed to Bloomberg News.

``ISDA confirms a netting trading session will take place between 2 p.m. and 4 p.m. New York time for over-the-counter derivatives,'' the ISDA said. ``Trades are contingent on a bankruptcy filing at or before 11:59 p.m. New York time, Sunday, Sept. 14, 2008. If there is no filing, the trades cease to exist.''

by Calculated Risk on 9/14/2008 01:53:00 PM

From the NY Times: Lehman Heads Toward Brink as Barclays Ends Talks

Unable to find a savior, the troubled investment bank Lehman Brothers appeared headed toward liquidation on Sunday, in what would be one of the biggest failures in Wall Street history.
...
What remained unclear was how a liquidation might proceed. One option that was discussed on Saturday would have major banks and brokerage firms continue to do business with Lehman as it unwinds its assets and liquidates over a period of months, according to several people briefed on the discussions. ... The overarching goal of the weekend talks was to prevent a quick liquidation of Lehman...

This seems the most likely scenario right now.

Also from WSJ: Barclays Walks from Lehman Deal; Likelihood for Transaction Narrows

by Calculated Risk on 9/14/2008 01:08:00 PM

Bloomberg: Barclays Withdraws From Lehman Talks Over Credit Guarantees

NY Times headline: Barclays Says It Has Walked Away From Talks With Lehman

From the Telegraph: Barclays walks away from deal to rescue Lehman Brothers (hat tip energyecon)

British banking giant Barclays has decided to walk away from talks to buy some or all of troubled US investment bank Lehman Brothers.

Barclays, whose negotiating team is led by Barclays Capital chief Bob Diamond, is in the process of informing Lehman and the Federal Reserve Bank of New York that it no longer wants to take part in the discussions because of the US government's unwillingness to guarantee Lehman's assets.

Although Barclays is understood to be happy that the New York Fed was leading discussions for Lehman's $41.8bn of property assets to be ring-fenced, it is unhappy with the fact that its balance sheet would still be on the block for all the remaining counter-party and other risks within Lehman.
...
The surprise decision leaves a consortium led by Bank of America as the only potential buyer for Lehman ...

by Calculated Risk on 9/14/2008 09:13:00 AM

The WSJ reports that the talks are continuing Sunday morning in New York: Barclays Emerges as a Leader In Talks Over Lehman Brothers

Barclays PLC ... is emerging as a leading contender for Lehman Brothers Holdings Inc. as discussions continued Sunday in London and New York ... A sale of Lehman to either Barclays or Bank of America Corp. remained dependent on government financial support ...
emphasis added

The WSJ also reports that the good bank / bad bank structure is losing support, because Wall Street firms do not want to support the bad bank and help their rival - either BofA or Barclays - acquire Lehman.

by Calculated Risk on 9/13/2008 11:58:00 PM

From Heather Landy and David Cho at the WaPo: Major Financial Players Map Out Lehman Options

The article outlines three options:

The talks in New York have centered on several options, including the orderly liquidation of Lehman's assets starting as early as Monday. ...

The financial leaders also discussed a good-bank, bad-bank model in which Lehman would spin off its troubled mortgage assets and other major firms would provide financial guarantees to this bad bank.
...
A third scenario involves an outright sale of Lehman to one or more suitors. The leading contenders Saturday were Bank of America, HSBC and Barclays ... In this option, companies could acquire pieces of Lehman, and the New York Fed would serve as matchmaker.

Sounds like Sunday will be another work day for Hank Paulson and the NY Fed. Something will probably be announced before the Asian markets open Sunday.

by Calculated Risk on 9/13/2008 06:19:00 PM

The WSJ reports: Lehman's Options Narrow, With Forced Breakup Possible

A sense of optimism that a rescue could be arranged today dimmed as a growing sense of gloom descended on Wall Street.

It appears nothing will be worked out today as the WSJ reports many executives have left the meeting. MarketWatch has a summary: Too late for Lehman?

A bankruptcy filing is possible:

Lehman has hired law firm Weil, Gotshal & Manges LLP to prepare a potential bankruptcy filing ...

by Calculated Risk on 9/13/2008 05:16:00 PM

The Financial Times has more on the emergency discussions in New York: Wall Street firms could buy Lehman ‘bad bank’

Wall Street firms would buy the $30bn-plus of property assets held in Lehman Brothers’ “bad bank” in order to facilitate a rescue takeover for the embattled financial group, under one of the options being discussed by industry executives and regulators.

Financial chiefs have so far expressed reluctance to back the plan but remained locked in discussions with Treasury and Federal Reserve officials in New York Saturday in an effort to solve the crisis at Lehman before the markets open on Monday ...

This apparently is just one option being discussed. There is much more in the article ...

Update: From the NY Times: Bankers and U.S. Map Out Options in Lehman Crisis

The group was working on two main contingency plans in case Lehman is unable to strike a deal to sell itself to one of several suitors — Bank of America or two British firms, Barclays and HSBC. Under one possibility being discussed, major financial firms would jointly inject new capital into Lehman, allowing it to spin off its portfolio of troubled securities into a separate company.

Under another option, Lehman would start an orderly liquidation of its assets on Monday. Its major competitors would agree to keep doing business and trading with Lehman as it unwound its business and portfolio.