Lehman: We Don’t Need Money But We’ll Raise Some

After the Bear Stearns (BSC: 10.73 +0.24 +2.29%) fiasco, it seems one of the most-used lines by financial company spokespeople or the CEOs themselves is something like “we don’t need money”. It’s rather ironic to hear them say that even as they are trying desperately to raise money. One case in point is Lehman Brothers (LEH: 41.47 +3.83 +10.18%) which says it doesn’t need money but that it’s selling at last $3 billion worth of shares to raise capital.
Lehman’s stock declined after this announcement although an “insider” claims that there is a lot of interest in subscribing to these new convertible preferred shares. Unlike normal shares, this offering will offer a coupon payment of 7% to 7.5% and a conversion premium of 30% above market. As with most convertible bonds/shares, it is simply a way of packaging a loan where the loan principal will be paid back as predetermined number of shares.
Some analysts have raised Lehman’s rating and say their share prices are below fair value. So while that may well be the case, one has to ask why a company that doesn’t need capital is putting together a deal to borrow money with what might under normal circumstances seem a relatively high premium both in coupon payments as well as in the low share price at which the shares would be issued.