After Merrill Lynch (MER) offloaded $30.6 billion worth of its mortgage junk to Lone Star, speculation swirled that Lehman (LEH) would soon do the same. But finding a buyer for these kinds of risky assets, or at least one willing to pay Lehman’s asking price, was apparently easier said than done.
Lehman’s solution? It will buy its crappy assets from itself. Bloomberg, citing anonymous sources, is reporting that Lehman is holding talks with outside investors to set up a company that will specialize in buying distressed mortgage assets:
Lehman Brothers Holdings Inc. may set up a company funded by outside investors to buy some of its mortgage assets, aiming to dispel concern the firm faces crippling losses, people familiar with the discussions said.
Investors in the new venture would also manage the holdings, which are linked to commercial real estate, the people said, declining to be identified because the proposal hasn’t been made public and no decision has been made about how to proceed. The New York-based firm had about $40 billion in commercial-mortgage assets as of May.
The move is aimed specifically at Lehman’s $40 billion portfolio of commercial real estate loans. Lehman has lost about 80% of its value since it began taking the first write-downs on what would eventually be an $8 billion loss.
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