Lehman Brothers’ publicly listed fund of funds has resumed trading amid intense speculation of what will ultimately become of the bankrupt investment bank’s alternatives platforms.
Euronext-traded Lehman Brothers Private Equity (LBPE) closed trading today at $5.05 (€3.57) per share, down roughly 18 percent for the day and trading at roughly half of the fund’s estimated net asset value per share. The fund had suspended trading yesterday on news of Lehman’s Chapter 11 bankruptcy filing.
In a statement released today, LBPE reiterated its legal insulation from its parent company’s bankruptcy proceedings, saying that all of the fund of funds’ assets are segregated from Lehman and that there exists no intercompany loans between the two entities.
By the end of today, the fund anticipates less than €300,000 will be deposited in Lehman Brothers accounts, according to the statement.
LBPE also confirmed that a highly anticipated sale of Lehman’s Investment Management Division, the investment bank’s asset management and alternatives platform of which LBPE is a part, could be concluded in the near future. The Investment Management Division, a separate legal entity from the holding company which controls Lehman, was not a party in the bankruptcy filing yesterday.
“The Senior Management of the Investment Management Division of Lehman Brothers, which includes the Investment Manager, is in advanced discussion with a number of potential purchasers to sell the Investment Management Division,” the statement said. “The Investment Manager is hopeful that an announcement on this transaction will be made within a very short period of time.”
The Investment Management Division has reportedly held talks with a number of high-profile private equity firms about a potential deal. Bain Capital, Hellman & Friedman, Clayton Dubilier & Rice and Kohlberg Kravis Roberts have all been reported to have been in high-level discussions to acquire the assets, which include Lehman’s merchant banking, venture capital, real estate, credit and infrastructure groups.
The fluctuation in LBPE’s share price comes after months of maneuvering by the fund of funds to generate more liquidity from the public markets. In July, the fund reached an agreement with ABN AMRO to repurchase up to 5 percent of outstanding shares to generate more trading and ultimately raise the stock’s trading price closer to the fund’s NAV per share estimates.
Shares of LBPE are now trading at a 47 percent discount to the fund’s estimated NAV of $10.81 as of 31 August.
In related news, private equity firm CVC is expected to buy Lehman’s 16.8 percent stake in racing league Formula One, according to a report from The Guardian. CVC is the biggest shareholder in the company.