Meltdown, Secondary Market, Spillover

Fund shuttering harms Lehman

 

From CNBC:

Ospraie Fund, a big commodities fund partly owned by Lehman Brothers Holdings, is closing down and will return money to investors after incurring big losses this year.

People close to the fund, which had nearly $4 billion in assets, said the losses resulted from bad bets in copper and natural gas, causing the flagship fund to lose 38% since the beginning of the year.

The closing of the fund is a big blow to Lehman, whose 20% stake in Ospraie is part of the investment-management business that Lehman is shopping to help raise capital.

Lehman’s stock fell sharply in after-hours trading after CNBC reported the fund was closing.

Lehman has been trying to sell all or part of its investment-management unit, which includes the crown jewel, the Neuberger & Berman money management business, to offset what many analysts expect to be billions of dollars in additional losses in the third quarter because of soured debt assets on Lehman’s books.

Lehman, which has been battered by its losses in the mortgage market, is in desperate need of cash in order to remain viable as an independent entity. It reportedly has been courting Korea Development Bank in an effort to save itself from a crippling $65 billion of commercial and residential real estate securities and loans gone bad.

The loss of of the Ospraie Fund comes as a huge blow to its effors to find a source of outside capital. 

Ranchos Window, originally uploaded by Mary Hockenbery (reddirtrose).

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