15 September 2008

Lehman Brothers files for Chapter 11 bankruptcy protection, the largest bankruptcy filing in USA history.


Lehman Brothers Holdings Inc., the fourth-largest U.S. investment bank, succumbed to the subprime mortgage crisis it helped create in the biggest bankruptcy filing in history.

The 158-year-old firm, which survived railroad bankruptcies of the 1800s, the Great Depression in the 1930s and the collapse of Long-Term Capital Management a decade ago, filed a Chapter 11 petition with U.S. Bankruptcy Court in Manhattan on Monday. The collapse of Lehman, which listed more than US$613-billion of debt, dwarves WorldCom Inc.’s insolvency in 2002 and Drexel Burnham Lambert’s failure in 1990.

Lehman was forced into bankruptcy after Barclays PLC and Bank of America Corp. abandoned takeover talks on Sunday and the company lost 94% of its market value this year. Chief Executive Officer Richard Fuld, who turned the New York-based firm into the biggest underwriter of mortgage-backed securities at the top of the U.S. real estate market, joins his counterparts at Bear Stearns Cos., Merrill Lynch & Co. and more than 10 banks that couldn’t survive this year’s credit crunch.

Lehman shares dropped 81% in Frankfurt trading to 75 cents from their US$3.65 close in New York on Friday. UBS AG, HBOS PLC, and Axa SA led a decline of more than 3% for European stock markets on speculation a forced sale of Lehman’s assets could lead to further writedowns at other banks.