Lehman Liquidates $1B in Investments

April 10, 2008— -- NEW YORK (AP) -- Lehman Brothers liquidated three investment funds last quarter after their assets declined in value amid the larger credit crisis, according to a regulatory filing.

Lehman moved the funds' assets -- worth about $1 billion -- onto its balance sheet. The bank purchased another $800 million in "deteriorated" assets from other funds, according to Lehman's report for the quarter ended Feb. 29.

Lehman did not specify what types of assets were affected. Mortgage-backed securities and complex derivatives of those investments have been declining in value as more home loans enter some stage of default. That has made investors skittish about buying many other types of complicated Wall Street products, causing the market for those securities to seize up.

"Due to market disruptions that occurred in the second half of the 2007 fiscal year and further deterioration in the 2008 quarter, certain investments held by the funds were either downgraded by rating agencies and/or experienced a decline in fair value," Lehman said in the Wednesday filing.

Lehman has written off $3.93 billion on its credit and lending portfolios since the third quarter of 2007, including $1.8 billion in the first quarter of this year. The bank did not indicate whether any of that total was for the assets in the liquidated funds.

The bank was not required to purchase the distressed assets. Not doing so, though, would likely have caused the funds to fail, Lehman said.

In electronic premarket trading, Lehman shares slid $1.01, or 2.5 percent, to $39.53. The stock closed at $40.54 Wednesday, falling in late trading after the regulatory filing was made.