Posted by: Lauren Young on September 11, 2008
This was written by Ben Levisohn, a staff editor at BusinessWeek
Yesterday, Lehman Brothers tried to defuse massive talk of its imminent demise as an independent firm by disclosing plans for the future.
But rather than halting the freefall in Lehman’s (LEH) stock, the moves seems to have accelerated it – shares are down nearly roughly 45% in early trading on Thursday.
More worrisome, the spread on credit default swaps – the cost of protecting Lehman’s debt – has jumped from around 500 basis points yesterday to well over 700 today, according to Phoenix Partners Group, a swaps broker. In real terms, that means it now costs over $700,000 to insure $10 million of Lehman bonds.
To put that in perspective, Lehman credit default swaps are approaching the level of Bear Stearns before the Fed-orchestrated bailout.
For Lehman, the end game is on.